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The challenge of meeting SDG 7: Ensure access to affordable, reliable, sustainable and modern energy for all

Innovative approaches will be needed to resolve enduring challenges in meeting the unmet energy needs of people, especially in the developing world, in light of the global commitments made under SDG 7. For example, the time-honored approach to electrification of households and firms is through connections to a national grid. But this traditional model, because of its expensive and technically rigid nature, has been unable to provide access to 1.1 billion people across the world with a reliable supply of electricity, despite the impressive expansion in recent years in many low and middle-income countries. At the same time, national grids are often driven by fossil fuels making them unresponsive to concerns about climate change.

Contemporary experience across the world has shown that the off-grid solar sector (OGS) can serve as a viable and ecologically friendly supplement to a national grid in responding to the needs of unserved and underserved households and firms, especially in low-income communities. The most recent global evaluation suggests positive and enduring benefits. The sources used for this summary can be found here, here and here.

  • In 2017, OGS provided improved electricity access to 360 million people and the expectation is that this will double over this decade. This means that the OGS can play an important role in supporting the attainment of SDG 7
  • By encouraging households to switch from kerosene and other conventional fuels, OGS devices have led to an estimated savings of USD 5.2 billion
  • 6 million tons of greenhouse gas emissions have been avoided using traditional fuels
  • Providers of OGS devices have been a source of direct job creation in the formal economy. For example, in 2010, globally there were only 60 firms. By 2017, this has risen to 300
  • The market for OGS is competitive, with the market concentration ratio falling from 50 percent of annual sales to approximately 30 percent between 201 and 2017
  • OGS devices have indirectly supported an estimated 1.9 million people in income-generating activities by spawning new business and expanding existing business demonstrating an important link between formalization and electricity provision
  • An estimated 45% of OGS users reported health benefits by reducing their reliance on kerosene
  • These global benefits have been supported by a regional evaluation of several East African countries
  • In terms of job creation, estimates based on the East African experience suggest 21 fulltime equivalent (FTE) jobs per 100 OGS devices sold, with 52 percent of these FTEs being undertaken by women and 50 percent in rural areas.
  • Given that globally in 2017 an estimated 22.3 million devices were sold, the implied global job creation rate is 4.68 million that can be attributed to the OGS
  • An evaluation from India suggests a higher degree of consumer satisfaction with OGS devices than with the national grid

There is, of course, the issue of the role of the private sector, the government and donors. Certainly, the private sector has been responsible for the direct provisioning of OGS devices, but this requires the support of the government. Increasingly, governments are aware of the role that OGS can play in supporting the unmet energy needs of households and firms. Hence, as in the case of Kenya, OGS has become a formal part of the national electrification strategy. The global industry association that represents firms in OGS has argued that perhaps one of the most effective ways in which governments can support the development of the off-grid solar energy is through the provision of fiscal incentives. If taxes and tariffs are either temporarily or permanently withdrawn from all OGS devices, there will be a significant drop in prices stimulating the expansion of OGS. In Kenya, for example, a reduction in the price of a solar lamp due to fiscal incentives by 43 percent can increase household uptake of OGS devices by 22 percent.

Finally, donors can play and have played, a supportive role, especially in low-income countries that are significantly reliant on development assistance. For example, the World Bank Group has been quite active in supporting the development of the off-grid energy market in 25 countries, mostly in Sub-Saharan Africa.

 

 

 

 

 

 

 

 

 

 

Is the Australian central bank governor now toeing the party line?

In a recent speech, Mr. Philip Lowe, the governor of the Reserve Bank of Australia (RBA),  made the following remarks after the latest round of a cut in the policy rate:

…over recent times I have been drawing attention to the fact that, as a nation, there are options other than monetary easing for putting us on a better path.

One option is fiscal support, including through spending on infrastructure… It is appropriate to be thinking about further investments in this area, especially with interest rates at a record low, the economy having spare capacity and some of our existing infrastructure struggling to cope with ongoing population growth.

Another option is structural policies that support firms expanding, investing, innovating and employing people. A strong, dynamic, competitive business sector generates jobs. It can help deliver the productivity growth that is the main source of sustainable increases in our wages and incomes. So, as a country, we need to keep focused on this.

To repeat the point, it is important that we think about the task ahead holistically. Monetary policy does have a significant role to play and our decisions are helping support the Australian economy. But, we should not rely on monetary policy alone. We will achieve better outcomes for society … if the various arms of public policy are all pointing in the same direction.

The reaction of Mr. Josh Frydenberg, the Australian Treasurer was quite different. He was unwavering in the current government’s electoral pledge to attain a budget surplus rather than engaging in a fiscal stimulus – at least that is how media reports put it. The RBA and the Australian Treasury were singing different tunes against a background of the slowest growth rate of the Australian economy since 2009.

It now appears that the RBA governor has been cajoled into singing from the same hymn sheet. He seems to be saying, ‘she’ll all right mate’. Of course, he adopted a  bland style, as in the following observations, but the intent was clear (let us not rock the boat):

Thank you, Treasurer for the discussions today. I agree 100 per cent with you that the Australian economy is growing and the fundamentals are strong. The outlook is being supported by our lower interest rates, by your tax cuts, by higher levels of investment in infrastructure, by a pickup in the resources sector and the stabilisation of the housing market in Sydney and Melbourne. But I don’t think we should forget that more Australians have jobs today than ever before in Australian history. That’s a remarkable achievement. And I also agree with you that a priority is to make sure that Australia remains a great place for businesses to expand, innovate, invest and employ people and I’m sure we can do that.

Well, does the RBA really have independent views, despite central bank independence?

 

 

Australia’s ‘per capita recession’ persists

Look at the graph below which charts Australia’s GDP growth rate both on an annual (the black line) and quarterly basis (the green columns). Should one be worried?

Not really, if one reads the statement of the Chief Economist of the Australian Bureau of Statistics (ABS). In the media release accompanying the latest quarterly GDP figures, the Chief Economist of the ABS is cited as saying: “The economy continues to grow as we head towards twenty-eight years of sustained growth” but acknowledges that it is below the long-term growth rate of 3.5%. If the quarterly trends persist, then one can expect the annual growth rate for 2019 to be 1.8% – which is barely above the population growth rate of 1.6%

 

Diagram shows GROSS DOMESTIC PRODUCT, Volume measures: Seasonally adjusted

Source: ABS

What the Chief Economist of the ABS does not acknowledge is that for three consecutive quarters, the GDP growth rate has been below the population growth rate. Hence, Australia has been in a ‘per capita recession’ in recent quarters, as leading economists and analysts have often pointed out.  There is a danger that the economy might tip into a ‘real recession’ with an actual decline in overall GDP for two consecutive quarters. While the Reserve Bank has dropped the policy rate to a historic low (1.25%), there is likely to be limited stimulus from monetary policy, as the Reserve Bank Governor himself acknowledged. As he put it: ‘There are certain downsides from relying just on monetary policy and there are limitations on what, realistically, can be achieved. So, as a country, we should also be looking at other options …One option is for fiscal support’.

One needs fiscal stimulus in the form of enhanced government expenditure, especially on infrastructure.  Relying on tax cuts is unlikely to be enough as an evaluation of the latest US experience shows. Alas, the Australian government is trapped in the language of accumulating fiscal surpluses as the primary metric of good economic management.

 

Lest we forget the post-election reality: ‘happiness’ in Modi’s India

Prime Minister Narendra Modi led the Bharatiya Janata Party (BJP) to another landslide victory in the 2019 Indian elections. It was even bigger than the 2014 elections. His party now has more than 300 seats in the Lok Sabha of 543 seats. The Opposition can barely muster more than 90 seats, with the once formidable Congress holding a paltry 52 seats. We are witnessing the consolidation of ‘Modi’s India’. As a leading political scientist observes, ‘…I am ascribing the victory primarily to Modi, not to the BJP.’

The recent emphatic electoral victory of the BJP has understandably led to joyous celebrations among millions of Modi’s supporters and his formal political allies in parliament, but such states of happiness are ephemeral. As the excitement of victory wanes, one needs to ask how ‘happy’ Indians are as measured by life satisfaction surveys. These surveys use the metric of the Cantril ladder of self-reported feelings of life satisfaction (0 being the worst, 10 being the best). Did Modi’s promise of ‘good times’ (acche din) and ‘inclusive development’ (sabka saath, sabka vikas), while advancing the cause of Hindu nationalism, boost the collective feeling of well-being among Indians on an enduring basis?

To gauge the state of happiness in India today under the Modi regime, one can turn to the 2019 World Happiness Report by the UN – the seventh such report. It uses data from Gallup to measure, rank and analyse the state of happiness across the world from 2005 to 2018.

India fares poorly. Its rank is 140 out of 156 nations based on an average of scores for the 2016-2018 period. It ranks significantly behind South Asian neighbours, such as Pakistan (ranked 67) and Bangladesh (ranked 125). The trend in the reported happiness index for India is worrisome. India slipped significantly in the rankings and the index itself fell by more than 1.1 points over time (from an overall index of 5.15 in 2005-2008 to 4.02 in 2016-2018). It shares this significant negative trend with several conflict-ridden countries, such as Yemen, Syria and Venezuela.

The 2019 report concludes that, in statistical terms, there is a close association between per capita income, healthy life expectancy, social support, freedom to make life choices, generosity, perceptions of corruption, and aggregate measures of life satisfaction. In the so-called ‘happiness league tables’, India seems to be dragged down by lack of social support and poor performance in healthy life expectancy even as per capita income has grown significantly over time.

There are other surveys that are broadly consistent with the findings of the UN report. Gallup conducted a survey in 2018 which showed that only 3% of Indians were ‘thriving’ (that is, the proportion who rated their current life satisfaction as 7 or more and their future life satisfaction as 8 or more) relative to 14% in 2014 (when the BJP came to power).  The Gallup report attributes this to very high levels of inequality in India and the huge rural-urban divide in which most of India’s agricultural households are in debt.

A 2018 survey of the Pew Research Centre reveals that the time-frame over which Indians are asked to evaluate their views of whether economic and social conditions are improving seem to matter a great deal. When asked if the financial situation of the average Indian is better today than 20 years ago, roughly 65% say that it is better. If, on the other hand, when asked whether the situation in terms of challenges facing India – such as lack of job opportunities – has gotten better or worse over the last five years (a time frame that largely encompasses the Modi government), few (21%) have positive observations to offer.

In sum, while a Modi-led BJP government can savour a splendid electoral victory, the challenge of governing a nation in which the state of happiness (as measured by self-reported life satisfaction) is rather low and has apparently worsened over time is formidable. How that challenge will be met remains to be seen.