Aweh dearly beloved fellow ruminants & groupies
129/284 days of load shedding in 2022
Today I wish to return to the topic of bureaucratic violence as a favourite topic of mine. In an earlier blog post I wrote about the late David Graeber who coined the phrase, “bureaucratic violence”. He wrote a book entitled, “The Utopia of Rules: On Technology, Stupidity, and the Secret Joys of Bureaucracy”. He has also written a very good essay on bureaucratic violence which is more accessible.
I have lost count of the number of times I have had to submit a certified copy of my ID to comply with the Financial Centre Intelligence Act (FICA) requirements. The requirements have now evolved to the certification of your ID having to be less than 3 months old. This means that you need to get a commissioner of oaths to stamp and certify a copy of your ID. One can, in principle, go to your local police station to get the certification done but, in many cases, the bored and disinterested police officer on duty would happily certify the identity of Donald Duck. I have personally experienced the officer just stamping the document without even looking at it on more than one occasion. Some financial institutions have cottoned on to this and will no longer accept certification at your local police station and require the commissioner of oaths to be a lawyer or accountant.
The need to recertify your ID every three months has now just become an accepted fact of life for legal compliance and to combat fraud and terrorism. This is for the greater good you see. Why does your ID expire after three months? Are you not the same person in three months’ time with the same identity? Why has three months been chosen? Would it not be even better if you need to recertify every month? Fewer terrorists and fraud. Must be good. This would be even better for the stamp manufacturers and create more employment for commissioners of oaths.
So, what has this got to do with green technology and climate change? Well, there is a rapidly growing green bureaucracy that has been set up to accredit and bless green projects. Let’s look at some examples. Let’s start with a regulation called “Reducing Emissions from Deforestation and Forest Degradation” (REDD+). The idea here is that if you can demonstrate a project to save forests from deforestation and convince the bureaucrats of this you can get accreditation and get allocated carbon credits which you can then sell to a willing buyer like Virgin Atlantic who can burn fossil jet kerosene with a clean conscience knowing that there are matching carbon credits for forests that have been saved. This must be good.
However, there is an intermediary bureaucracy and the term bureaucratic violence has been used in a peer-reviewed journal article describing the experience of a Cambodian forest preservation project seeking accreditation. Green ‘assets’ are now estimated to be worth hundreds of billions of dollars, and the production of these assets has spawned a technocratic and highly paid side industry. To be awarded tradeable carbon credits requires extensive technical and bureaucratic work. The authors contend that achieving accreditation requires bureaucratic rituals and representational fabrications of the carbon credits they can sell. It took years of negotiation, labour, and skill to finally achieve accreditation for the Cambodian project and the bureaucratic requirements kept changing and evolving. The authors termed this bureaucratic violence. The bureaucratic intermediaries derive benefits and value from wages, grants, trading, and profits and are incentivised to grow the bureaucracy and make the process more complex so they can extract more value for themselves. If you have the time read the paper and judge for yourself.
Let’s look at another evolving green technology, sustainable aviation fuel (SAF) produced from green hydrogen and carbon dioxide. So, where do you get the carbon dioxide from? Ideally, you would extract that directly from the air using direct air capture to have a true net zero footprint but that’s extremely expensive if it’s viable at all. The global alliance on Powerfuels has published a report on this topic and current regulation allows you to use “unavoidable” carbon dioxide emissions instead. The report however goes on to lament that what exactly counts as “unavoidable” is not yet clear in the regulations and that the regulations need to be amended to make this clear. Here is another opportunity for an intermediary bureaucracy to grow to clarify the regulations and to accredit and bless SAF projects. This accreditation is essential so that your aviation fuel can have a SAF label to market it to airlines as sustainable. Watch this space and if the REDD+ example is anything to go by expect ever-changing regulations and bureaucratic violence to evolve with an associated bureaucracy serving its own interests.
To kick start the large-scale production of green hydrogen subsidies will be required and the USA has initiated government subsidies. The EU is lagging but is working out the details for a green hydrogen subsidy. Getting your project accredited and ensuring payment of the subsidy is going to require an intermediary government bureaucracy. It is now also worth taking note of Parkinson’s law of bureaucracies which states that bureaucracies grow at 5% per annum irrespective of how much work they need to do. The renewable energy transition will usher in a golden age for bureaucrats. Hundreds of thousands of documents are going to need to be certified, notarised, and apostilled and this will need to be redone every three months to avoid terrorism and fraud.
Let’s now look at a fascinating interview with the market strategist and historian Russel Napier. He argues that the world is about to see capital investment on a massive scale with green technology being one of the areas that will see enormous capital investment. This capital investment will not be on a free-market basis but be directed by governments and bureaucracies to try and achieve carbon reduction goals albeit inefficiently. He then looks to history where in the period 1939-1979 government interfered in capital allocation leading to misallocation of capital, value destruction, and ultimately stagflation with high inflation and high unemployment. We are not nearly there yet but if history is any guide governments and bureaucracies are not capable of allocating capital wisely or efficiently. In the short to medium term, there will be a capital spending boom but then as the results of a massive misallocation of capital becomes evident and the value destruction needs to be reckoned with, we will contend with high inflation and high unemployment.
“First will come the seemingly benign part, which is driven by a boom in capital investment and high growth in nominal GDP. Many people will like that. Only much later, when we get high inflation and high unemployment when the scale of misallocated capital manifests itself in a high misery index, will people vote to change the system again”.
The energy and climate change problems we have will be solved by massive capital investment and companies that are geared to this renaissance in capital spending, particularly service providers rather than owners, will do well. Later when the misallocation of capital becomes evident there will be a price to be paid. Wash, rinse, repeat.
Thank you for all the ideas and comments. I really appreciate them and please keep them coming.
Regards
Bruce
Ruminant Pink Friday 