Introduction
Most of us should be very familiar with Jeremy
Rifkin and the idea of Net Zero Marginal cost.
European Bankers and Financiers have mastered how to structure energy projects
with Proxy Rebates and Credits utilizing direct PPA finance instruments. This
is irrespective of whether these projects are grid connected or off grid. It
doesn’t even matter whether the project scope is at community, regional and
national level. As a consequence the idea of Net Zero Carbon communities that
are self-managed, sustainable and resilient is no longer a mystery. The
question is why do so many nations in Africa, SE Asia and the Indo-Pacific
region struggle to incorporate the principles of Net Zero Marginal Cost with
Net Zero Emissions into their anti-poverty, food security and Climate Change
resilience national development policy agenda?
The
pathway to energy efficiency is neither a political, nor an economic policy
priority for all nation states. In SE Asia and the Indo-Pacific as well as in
Africa and Latin America, energy policy is tied to geopolitical, trade , security and soft-diplomacy initiatives. Integrated sustainable development for building
resilient communities is often cited as the reasons for development aid. What integrated solutions look like often escapes
the eye of the policy maker. We know that appropriate planning pathways for
energy, water, sanitation, health, education, transport and communications
infrastructure is best integrated in a holistic anti-poverty and regional growth context. There
is little evidence that neither the funding nor the project management
expertise follows the expressed development objectives. We see unilateral,
bilateral, trilateral and multilateral agreements that are frequently self-serving, poorly co-ordinated and inappropriately structured, planned
and executed. We also see international and regional financial institutions;
NGO’s and private for profit businesses ignore the very ideals that underpin sustainable
development aid finance. These capacity
building deficiencies are not
confined to the manner in which finance is structured but are found in the very
nature of traditional project management principles that underpin the
development aid process in a soft-diplomacy context.
Energy
efficiency should be a central political economy policy platform instead of
being treated as a separate issue from energy generation, transmission and
distribution in all developed and developing nations. It should in fact be an
integral part for identifying energy priorities in a national and transnational
holistic value chain GHG
development funding framework. The reality is that it is not. The recent announcement of a tri-lateral
energy infrastructure agreement between the Australian,
Japanese and US government for
the Indo-Pacific
demonstrates this. The question
is why is there such poorly
co-ordinated capacity planning in regions most vulnerable to Climate Change? What indeed are
the priorities and why have the assumptions that underpin them so far failed
to deliver lower debt and greater local community resilience in a full circle
value chain self-managed sustainable development
framework. Is it truly a question
of how much we spend and what we spend it on, or should it be a question of how
we spend what spend in order to achieve economic
sustainability and community resilience at the lowest debt to equity ratios. In Australia’s case we find that outsourcing this
responsibility to four preferred private contractors neither delivers
Australian taxpayer nor long term DFAT value for money.
Identifying the barriers
We understand
and recognize that traditional pathways to energy security, access and
affordability remain barriers to entry for intelligent and innovative decentralized off-grid Mini-grids
and grid connected closed Smart-grids in developing countries. We also
recognize that integrated E-WASH-E-T-C (Energy, Water, Sanitation, Health,
Education, Transport & Communications) solutions are not independent of
each other in a 21st
knowledge and skill based economy. Applying contextually appropriate infrastructure solutions in
societies with a relatively low level of knowledge and skill social capital
remains a key capacity building requirement for these societies. Inheriting
institutional infrastructure and value sets that govern them can often lead to
perverse outcomes. The PNG education system is a case in point. Built in a
mirror image of the Australian education system it copies all the problems and
issues Australia struggles with when it comes to education standards,
compliance and enforcement. It is not surprising that these issues are
multiplied many times in a developing country such as PNG.
The
2014 Country Report into financing the PNG TVET sector illustrates several points in this regard. We don’t have
to go past page 10 of the report to find out why overlaying an Australian
education structure onto PNG and other Pacific economies poses recurrent structural
issues at governance, institutional and national economic development level.
The red circle ( see Image below) demonstrates the structural and functional
problems at the national, provincial, district and local government level all
the way down to the school management level in PNG.
Just
as there is a fundamental disconnect between the department of Labour, Industry
Relations and Industry Training with the department of Education in the
Australian Federal system we find the same in PNG. The inheritance of the
Australian Education and Industry / Industrial Relations governance structure
and bureaucratic value system by SE Asia and Indo-Pacific nations display
remarkably similar problems. These problems manifest at the functional and
structural governance level in the form of similar methods of corruption and
bureaucratic mismanagement. This manifests itself at the political level as fundamental
policy disconnectedness to the knowledge, research, skill and training needs of
industry and the country as a whole. Whether or not these dysfunctional
departmental and inter-departmental relations are exploited at some political
ideological level is not at issue here. What is pertinent is the manner in
which senior public servants exacerbate these dysfunctional relations
throughout the various bureaucratic layers down to the individual local institutions.
Australia did not achieve its status as the 13th most corrupt
nation of all OECD member countries for no reason at all. For an
anti-institutional corruption campaigner like me, this revelation is not news.
What is important to understand in the context of PNG development is that its
education infrastructure is not fit for purpose to support the development
needs of the nation as a whole. The primary reason for this is that the PNG department of Labour and Industrial Relations and Industry
Training cannot deliver any creditable workforce analysis without a national
industry policy. It therefore cannot enable a creditable national workforce
education and training policy let alone engage in specific industry sector
analytics. As a consequence, specific industry staffing requirements are
ignored and industry organizes its own training programs independent of the
formal education and training sector. This affects not only staff skill levels
but it makes any pathways and credit point recognition and transfer program
impossible to assess, measure and compare to any meaningful base line data set.
What is perhaps more perverse is that DFAT has not recognized this
fundamental problem. DFAT continues to fund its four preferred development aid
contractors to deliver Australian education capacity building support without
comprehending that its entire Indo-Pacific education aid program will not
achieve self-management let alone self-funding status under current spending
priority conditions for many years to come.
Breaking the strategic policy disconnect
The
Indo-Pacific, SE Asia and many parts of Africa are exceptionally well suited to
decentralized energy, water and sanitation models that minimize the cost of
building expensive new infrastructure. Little strategic policy planning that
integrates these essential infrastructure requirements with higher order knowledge
and skill transfer programs, let alone viable and workable knowledge and skill
capital retention practices are evident across all aid recipients under nearly
all development aid programs in the region. Continued spending on poorly
articulated education capacity building projects remain priorities for all
development agencies, NGO’s, the UN and regional development banks even though
Net Zero Marginal cost economies that can take full advantage of the Net Zero
Emission technologies require targeted education, research and TVET skills at
the local level.
There
are of course a plethora of specific purpose development aid programs receiving
funding. Many have been funded for years without any visible signs that any of these
programs are nearing completion or are becoming self-funding and economically
sustainable for the host nation. Naturally we hear that by necessity all
development aid is long term. Any solutions to complex cultural, social and
institutional governance issues have no quick fixes. We call this argument the
development readiness paradox. Others simply call it the parachute paradigm.
You simply take what works and superimpose the solution on the host nation
irrespective of development readiness, context or value sets.
This
condescending assumption by donor nations, NGO’s and institutions are the
reason many small nations in the Indo-Pacific have appalling debt to GDP
ratios. Even China’s argument that it does not interfere in the governance and
institutional arrangements of Indo-Pacific and SE Asian countries has a hollow
ring. China’s development loan structures are geared towards loan default for a
direct strategic foothold in the region. The Belt
and Road initiative (BRI)
of the Chinese government leaves little doubt. It is just as short sighted as
the capacity funding by the EU, Australia, US and Japan! At the heart of the
problem is that all donor nations struggle to comprehend that capacity building
is not about influence but a matter of trust. Without a properly trained and
skilled local workforce debt dependence in the Indo-Pacific, SE Asia and Africa
will continue to rise. At the social level the impact of Chinese workers and
their influence on traditional community values continues to cause tensions in
many African, SE Asian and Indo-Pacific societies as local job opportunities go
unrealized.
The Knowledge Economy is part of the Full circle Value
Chain
Without
the knowledge, skills and expertise to understand the opportunities full circle
value chain deployment of low GHG emissions alternatives in terms of
self-funding sustainable development solutions SE Asia / Pacific nations
struggle with all aspects of governance, standards, compliance and enforcement.
Once again we notice the contradiction! Do these countries struggle because
they don’t have the necessary levels of institutional knowledge, skill and
expertise to maintain acceptable standards of governance, compliance and
enforcement? Is the consequence weak and poorly informed decision making
practices, gullibility and corruption?
Perhaps the issue isn’t any of it but a cause of development aid.
Perhaps it is a simple matter of getting the advice assigned by the donor
nation / institution at a cost the recipient country agrees to repay.
At the
heart of these problems is the structural dysfunction of governance and
institutional inter- relationships across the board. Levels of development
entry, that include knowledge and skill base lines as well as legislative,
regulatory and bureaucratic obstacles continue to slow progress. They do so
because there is little work being done in the area of ‘appropriate’
development and how this relates to development ‘readiness’. Whether the
preconditions for orderly development progress are either ignored or purposefully
manipulated to service an ideological transition that serve established
interests and social elites, remains part of the institutional and legal
framework each country adopts into its governance structure. This can result in
aid requests for building capacity in areas secondary to a national industry
development priority, or contrary to it.
Financial
institutions and structured project finance practices are part of the growing
debt levels in the developing world
Whereas
much of this defies traditional development banking higher order thinking (HOT) in a global and regional
development context, we find that financial institutions labour to minimize
their exposure to future debt and stranded assets risk whilst balancing the
influence of their primary partners. This includes their long term energy
sector investments. A narrow development finance focus is often the root cause
of unequal regional development. Institutional capacity building options favour
soft diplomacy priorities of the lead donor nation. This can lead to greater
aid dependence, high debt to GDP ratios and stagnating economic productivity in
the SE Asia Indo-Pacific region. Recipient nations are often unaware that
institutional and governance structures recommended by external consultants and
specialist aid development companies / NGO’s rarely have the multi-disciplinary
skill and knowledge to offer full circle sustainable value chain solutions that
are long term debt neutral, culturally appropriate and socially responsible. In
many SE Asia Indo-Pacific countries unequal regional development remains
fundamental to issues of inequality, income distribution and poverty despite
phenomenal GDP figures. Australia is not immune from these concerns.
There
are two inherent problems. The first is that clean energy project planning
assumes a distributive decentralized solution that is framed in a fully
integrated E-WASH-E anti-poverty and climate solutions policy agenda. Much has
been said about sustainable cities and resilient communities! Little has been
said about how to deliver an integrated masterplan that delivers E-WASH-E-T
& C solutions that meet national and local community needs at the lowest
infrastructure and long term debt recovery cost for local communities. Defining
such a comprehensive political and economic agenda at a national and
sub-national level continues to drag industry, social and economic agendas for
many SE Asia Indo-Pacific nations including Australia. Even though such a
policy is often vocalized as the most urgent international problem, this
urgency is not reflected in the political and economic agendas of the ruling
political elite and key industry sectors of many countries. This disconnect
between what is said and what is done on the ground is often so great that many
communities feel marginalized from the economic benefits of growth and excluded
from the political decision making process.
The
same rhetoric is reflected in the international finance community who express
their desirable aims and objectives in convoluted terms. At the heart of the
problem is that the actual distributed decentralized funding models compare
equally unfavourably to ‘managed’ integrated funding approaches. The problem is
often a subtle distinction of diplomatic language and interpreted meaning
within a specific sector framework. In
soft diplomacy terms the dichotomy between the various approaches is best described
as the difference between unilateral, bilateral and multilateral agreements
between host and recipient nations. What is clearly at odds here is the meaning
and understanding of the words, ‘distributed decentralized funding’ and ‘managed
integrated funding’ and how these words apply to all aspects of soft-diplomacy
in an international development aid context.
Both
approaches to development funding often ignore the developing nations entry
level needs in favour of predetermined capacity building approaches that bind
the host nation to an identified framework of soft-diplomacy influence at the
institutional, social, cultural and industrial level. The idea of building a
developing/ emerging nation in one’s own image has a long standing history
going back to pre-colonial days. The inheritance of the structural and
functional problems of the donor nation at the governance and institutional
level is therefore a calculated trade-off for the recipient nation. The
underlying aid argument boils down to two things.
1.)
If you are
going to accept my money then you buy the conditions of sale plus interest.
2.)
If you accept
the conditions of sale plus interest then it is incumbent to spend that money
in the spirit of a negotiated long standing commitment of friendship and
reciprocity to which the binding agreement commits you.
What is
clear is that the inheritance of structural and functional problems from the
donor nation poses a set of contextual problems for donor countries and their
finance partners that can aggravate existing development problems. These can
slow development progress and cause both debt dependence and loan default
issues. The second issue is the effect this has on local institutions, through unwanted
dysfunctional influences and dependencies. These issues often stifle innovation,
resilience and sustainability goals long term. Whether this is through the
unintentional stagnation of local investment and secondary value chains in
Clean Energy, Water, Sanitation, Health, Education and other knowledge based workforce
skilling opportunities, or the loss of locally owned business prospects; remains
a matter for concern to both donor and recipient alike. Ignoring this unwanted
influence donor countries have on institutional and governance capacity
building remains at the core of bureaucratic corruption and other unwanted side
effects irrespective of whether the donor nation is China, the US or Australia.
Invariably this leads to further specific aid funding to address unequal
capacity issues that are either newly created due to unforeseen consequences or
due to specific purpose aid funding narrowly applied. Thus, requiring more aid
money to address the unbalance created by the aid money previously received! This
is what we call aid dependency even though the goal may have been for lower
long term debt and managed sustainable development.
If we
regard this dichotomy as a temporary anomaly in a country’s development progress,
the current energy infrastructure, knowledge and skill status remain important
considerations when charting a path for energy efficiency, security, access and
affordability. This is true for all integrated E-WASH-E-T &C Climate Solutions
scenarios whether these are applied to a developed or a developing nation. In
all cases the evaluation of where a country is; with respect to its energy
infrastructure and how it intends to develop it in relation to its
socio-economic agenda, demands a coherent national policy framework. This
framework must necessarily address all aspects of poverty, equity, access and opportunity.
The alternative is continued dependence on overseas aid and rising debt to GDP
ratios. Future stagnation in local business innovation shackling the knowledge
capital demands of the 21st century is clearly no longer an option
for international aid and development financing. It is not an option for
maintaining productivity and global competitiveness for any developed or
developing nation going forward.
The theoretical hurdle of government policy versus the
econo-babble of self interest
The problem
with much of the energy debate is that we think about energy in terms of a
specific purpose commodity. We fail to understand the ubiquitous nature of what
energy is in the context of everything we know about it. We even project this
level of narrow minded understanding into the phrase ‘Energy Efficiency’.
Implied are such things as conservation, anticipatory capacity, reduction,
adaptive systems capacity, absorptive systems adaptability and the reliability of
transformative technology and its alternative use.
The
scientific and very human reality is that the human race has always been
transforming energy from one form to another. We need to power ourselves and
the myriad of labour saving and convenience devices we consider of value in our
quest for civilization. Knowledge in the pursuit of profit though methods of
conflict and co-operative trade have been at the heart of every civilization
from the Indus valley, China, Egypt, Persia and Rome for thousands of years. We
wouldn’t even have the Climate Solutions and Energy Transitions debate if we
had our own micro-wave oven size fusion reactor installed in our home. As a
consequence we labour over the disconnected and narrow minded thinking that
ignores the energy value chain solutions created throughout a national economy by
not addressing the issues directly at local and regional community level. We
ignore that fact that the fossil fuel economy has never achieved more than a
20% national productivity level for any nation since the day the car was
invented. Despite this we struggle to transform our stagnating economies into
Net Zero Emission economies using Net Zero Marginal Cost principles for social
goods such as housing, energy, water, sanitation, transport, health,
communications and education. These social goods are ideally suited for the 21st
century Net Marginal Cost economics of the sharing economy.
Allowing
a small minority to control access and supply to a social commodity is only one
of the many issues in this debate. We ignore avoidable consequences in both the
short to medium term by concentrating distributive finance mechanism in the unequal
and unfair distribution of capital. As human beings we are ill prepared, from
an evolutionary stand point, of thinking about anything that extends beyond our
own immediate needs. Every major institution and government in any country on
spaceship earth reflects this conundrum. Despite this we find that the Indus
valley civilization was apparently founded on a distributed collaborative model
without centralized control and ownership of services. It was based instead on
an agreed collective master planning model for the cooperative ownership of
water, sewage and other social infrastructure that supported cities and
regional village live 4000 years ago without the need for a centralized
government. Jeremy Rifkin may indeed blame the concentrated financial power of
the fossil fuel barons and herald the emergence of the internet tycoons who
brought about the sharing economy as the basis for the Third Industrial age. I
do not believe that technology and the concentration of macro data sets in the
hands of a few global companies is the answer.
I agree that there is a monumental change a
foot! Convincing institutional bankers and politicians to think about finance
as a total value chain solution remains a problem when national governments are
not prepared to define their energy infrastructure in a national development
context. Financial institutions are prepared to exploit this situation by
funding projects that offer a secure return of investment. The fact that the
owners of energy capital seek to concentrate their control and ownership of any
national energy market will remain a fact of life. What is at issue is how,
where and to what extent a government ignores the necessary regulatory and
legislative market governance standards, compliance and enforcement mechanism.
This is especially true when current (HOT)
finance thinking favours ‘Proxy rebate plus credit finance options within the context
of a specific regional PPA supply agreement. The same type of financing options
are available for Water, sewage, transport, communications, social housing and
any other local infrastructure and food security issue facing SE Asian and
Indo-Pacific nations. Applying these finance options in an international and a
regional banking finance package remains the challenge.
What we
know is that the Net Zero Build Environment Emission model ( Fig 2.) is fully compliant with Jeremy
Rifkin’s Net Zero Marginal cost model. This is especially true if we consider a
Proxy Rebate and Credit PPA finance mechanism as the means to lower debt levels
in SE Asia and the Indo-Pacific that will promote sustainable and resilient
communities at both local and national level. Despite this we witness the AsiaDevelopment Bank and the African Development Bank Climate Change and Finance
department struggling to comprehend the basic concepts upon which these
solutions rest. Recent IMF funding of precisely such an energy model for the
Marshall Islands provides us with a glimmer of hope and a new pathway to building
Energy Efficiency capacity in the SE Asia and Indo-Pacific region. Whether it
translates into the rest of the Indo-Pacific in the wake of President Trump’s
recent trilateral energy funding announcement remains to be seen.
Author Biography
Mr. Angerer
has more than 30 years’ experience as a government adviser and senior
consultant covering all aspects of Climate policy and context specific
solutions for urban and rural development. Mr. Angerer has a multi-disciplinary
background in Architecture, Engineering, ICT, GIS & Mapping, Urban and
Rural Development, International Development Law, Transport Systems,
Environmental Management, Business and Project Management, Risk Analysis,
Change Management as well as E-Learning, Education Management and Training. Mr.
Angerer has developed the UN compliant E-WASH system with a focus on poverty
reduction, food and income security, whilst enabling positive investor returns
at the lowest risk for developing nations. Mr. Angerer’s expertise is in
strategic government and business policy and business development for all
aspects of renewable energy and Blockchain peer to peer VPN managed community
owned smart grids for integrated E-WASH grid connected and off grid system. Mr
Angerer also has an extensive background in employment and training policies
and curriculum design standards at national and international level.