How Economics (Not Technology) Will Save Our Climate

Summary

This insightful talk discusses the development challenges and opportunities in Southeast Asia, focusing on energy, electrification, and sustainability. The speaker highlights the disparity in energy costs, with countries like China charging lower rates, reflecting a more affordable approach for developing economies. Despite challenges, including low tax rates and governance issues, the speaker emphasizes the region's potential for growth, stressing the importance of education, political reform, and technological advancements. The discussion also touches on the complexity of balancing renewable energy ambitions with conventional energy needs and the global competition led by the U.S. and China in technology and AI.

Takeaways

• 😀 Southeast Asia faces a significant energy affordability challenge, with energy prices varying drastically between developed and developing economies.
• 😀 China, despite being a developed country, charges very low energy prices (4-5 cents per kilowatt-hour), making energy affordable for developing nations.
• 😀 Southeast Asia is largely reliant on non-renewable energy sources, with exceptions such as Cambodia and Laos, where hydroelectric power is growing.
• 😀 To become a modern region, Southeast Asia needs a terawatt of power generation, requiring an investment of 2-3 trillion dollars.
• 😀 Southeast Asia's fiscal constraints are severe, with countries like Indonesia having a tax ratio of only 9.5%, far below the typical 33% of OECD countries.
• 😀 The region receives about $200 billion annually in foreign direct investment, with Singapore receiving a large share (about $100-140 billion).
• 😀 The path to carbon neutrality for large economies like India and Indonesia is currently unrealistic within the 2050-2060 timeframe due to massive infrastructure and investment gaps.
• 😀 The affordability of energy for developing economies is around 5 cents per kilowatt-hour, significantly lower than in developed countries like Singapore or Japan.
• 😀 There is a critical need for the intersection of technological innovation and economic capital to make sustainable energy solutions affordable for developing nations.
• 😀 Leadership and governance are key factors in Southeast Asia's development, with countries like Singapore showing success due to meritocracy, integrity, and accountability in leadership.
• 😀 Southeast Asia may not be a creator of advanced technologies like China or the U.S., but it could become a tech-enabled region with the right investments and leadership in place.

Q & A

What is the price difference between charging a Tesla in Palo Alto and a BYD in Southeast Asia?

Charging a Tesla in Palo Alto costs about 46 to 48 cents per kilowatt-hour, while charging a BYD in Southeast Asia, particularly in Beijing or Jakarta, costs only 4 to 5 cents per kilowatt-hour.

Why does China charge such a low price for electricity despite being a developed country?

China charges 4 to 5 cents per kilowatt-hour because it views itself as a developing economy from a purchasing power perspective. The price is set to be affordable for the general population, similar to what developing nations can afford.

What is the average electrification level in Southeast Asia?

The electrification level in Southeast Asia varies widely, with Singapore and Brunei being highly electrified at about 9,500 to 10,000 kilowatt-hours per capita. Other countries like Indonesia have much lower levels, around 1,000 kilowatt-hours per capita.

What is the primary challenge for Southeast Asia to become a modern region in terms of electrification?

To become a modern region, Southeast Asia needs to increase its electrification to about 6,000 kilowatt-hours per capita. Achieving this would require an investment of around 2 to 3 trillion dollars, which most Southeast Asian nations currently cannot afford.

How does the fiscal space of Indonesia impact its development?

Indonesia, which makes up 43% of Southeast Asia's population and GDP, has a low tax ratio of just 9.5% compared to the 33% typical of OECD countries. This limits its ability to fund large-scale development projects, including the shift towards carbon neutrality.

How much foreign direct investment (FDI) does Southeast Asia attract, and where does it go?

Southeast Asia attracts about $200 billion annually in FDI. However, the majority of this capital goes to Singapore, which receives $100 to $140 billion, while other countries like Vietnam, Thailand, and Indonesia only attract a smaller portion.

Why is achieving carbon neutrality by 2050 or 2060 challenging for Southeast Asian countries?

Achieving carbon neutrality by 2050 or 2060 is unrealistic for many Southeast Asian countries, as it would take over 100 years for nations like India and Indonesia to reach electrification levels needed for modernity. This timeline conflicts with global climate goals.

What is the key to making energy more affordable for developing nations like Indonesia?

Energy affordability can be improved by aligning technological innovation, which could reduce energy costs from $0.15 per kilowatt-hour to $0.10, with rising purchasing power in developing economies, aiming for prices closer to $0.05 per kilowatt-hour.

What is the main obstacle to attracting FDI in Southeast Asia outside of Singapore?

The main obstacles to attracting FDI in Southeast Asia are poor governance, lack of transparency, and issues with accountability, competence, and integrity, which make other Southeast Asian countries less appealing to foreign investors.

What role does education play in Southeast Asia’s future development?

Education is crucial for Southeast Asia’s development. Singapore, for example, has risen to the top in global education rankings (PISA), and other countries like Vietnam have made significant progress. Improving education, especially in countries like Indonesia and Cambodia, is key to fostering a more skilled workforce.