Sustainability Is Too Expensive
The costs of renewable energy and production processes and green building materials exceed their value to the environment. Pro or con?
Pro: Lots of Costs, Little ROI
Former Washington Redskins quarterback Sunny Jurgenson, now a sportscaster, often derides the so-called prevent defense by saying, “the prevent defense doesn’t.” Ditto for “sustainability.” It does not sustain. It spends resources that would much more likely go into market efficiency. It wastes public monies and costs jobs.
This is obvious when examining the economics of the environmentalists’ favorite “sustainable” or “renewable” energy sources, solar power and windmills. According to the Energy Information Administration’s 2011 summary, the total cost per megawatt-hour of an average of solar thermal and photovoltaic will exceed four times that of advanced combined-cycle natural gas in 2016. For combined onshore and offshore wind, the cost exceeds 2.5 times that of gas.
Spain has already demonstrated the “unsustainability” of “sustainable” distributed energy.
The government bought support there by paying everyone who placed a solar panel on his or her roof an exorbitant amount. According to Gabriel Calzada, of Spain’s King Juan Carlos University, each “green job” that was created cost approximately $800,000 per year. Soon the solar subsidies began to gnaw away at Spain’s economy, and they were drastically reduced. Spain’s unemployment now stands at 21 percent, and there is a chance the government will default on its sovereign debt. Throwing money at solar energy and windmills has real costs and economic consequences that reverberate worldwide.
People may tell pollsters they favor “sustainable” projects, but they don’t buy them. Fewer than 7,000 private individuals have purchased the Chevrolet Volt, despite state and federal subsidies that approach $10,000 per car and that are transferred to the purchaser. All “sustainability” does is reward inefficiency and promote development of politically correct technologies people do not want. As the people of Spain and the stockholders of General Motors (that would be you, reader) know, sustainable development isn’t.
Con: Value in Real Dollars and More
Many mistakenly believe that current economic circumstances make sustainability unaffordable as businesses struggle to survive. This fails to recognize the economic drivers behind environmental sustainability as well as the serious actions many leaders are taking. Successful companies continue to invest in sustainable business practices despite slow growth across the economy. They correctly view sustainability as a lens for inspecting operational efficiency, innovating better products, and capitalizing on new markets.
Companies are reporting attractive savings from efforts to reduce energy use and eliminate waste: Dollar General, U.S. Food Service, and Primedia estimate they saved $106 million, $22.3 million, and $7.5 million, respectively, during 2008 and 2009 through green programs.
Moreover, sustainability efforts spur innovation and ultimately the development of better products and services. Perhaps best known is Toyota’s Prius. Initially dismissed as an expensive compact car, Prius has risen to be a high-volume seller, a flagship for Toyota’s innovation and a low total-cost form of transportation.
Finally, the wholesale migration of how we do many things in our economy will unlock new ways to create value. The clean technology transition, at its core, is the reinvention of all major infrastructure, i.e., energy, water, transportation, and buildings. GE, a major player in all infrastructure segments, has been capitalizing on this transition, with Chief Executive Jeff Immelt declaring that “Ecomagination is a competitive force for growth across GE’s businesses,” responsible for $18 billion in revenue in 2010.
These actions work in today’s market, which still allows many production costs to be externalized by the manufacturer, including emissions, landfilling waste, and loss of biodiversity. If market rules are incrementally changed to make private enterprise internalize the full cost of production (and the recent passage of a carbon tax in Australia is yet another example of a global trend in this direction), the already compelling profit potential of sustainability will explode.