“Green Premium” The solution to reducing greenhouse gas emissions 

Source: https://fortune.com/2021/02/16/bill-gates-climate-change-research-green-premiums/

Many activities pollute enormously and emit greenhouse gases in massive quantities. In particular, the production of electricity, transport, agriculture, the heating of buildings, and the manufacture of materials such as cement and steel.

Bill Gates has proposed a new alternative to deal with climate change known as “Green Premium”. Indeed, it is a tool that serves to significantly reduce greenhouse gas emissions without sacrificing the development of these activities.

The goal is to achieve carbon neutrality or net zero CO2 emissions by 2050.

Green Premium definition

Bill Gates, a businessman, invented the concept of “Green Premium” to find a solution to the elimination of greenhouse gases.

The objective is to emit ten percent less greenhouse gases during the development of these activities.

In general, the current cost is “the amount a company pays to replace an equivalent asset in the current market. The goal is to accurately represent the value of an organization’s assets and inventory by reflecting current market prices”[1].

When we refer to “zero emissions”, we must think of the current cost of a product in a double way, namely, the manufacturing cost determined by the working methods, materials, and specifications used, plus the additional cost of the same as environmental compensation for the pollution generated during their development. Both types of costs need to be considered to achieve the goal of reducing greenhouse gas emissions during the development of industrial activities.

Therefore, Breakthrough Energy defines the green premium as the extra cost of choosing a clean technology rather than one that emits more greenhouse gases[2].

What is the economic impact?

The problem is that clean solutions are more expensive than high-emission solutions. The question is what the reason for this economic behavior is. This is explained by the fact that we do not consider the real economic and environmental costs of more polluting options, such as fossil fuels, in the prices paid by end consumers[3].

Thus, the green premium represents the difference between the cost of a non-sustainable product and that of a sustainable version. It is the additional amount that must be paid for this product to be durable[4].

The phenomenon is illustrated by this example: “The average retail price of ground beef is $3.79 per pound, while a plant-based burger is $5.76 per pound. The Green Premium for a zero-carbon burger is the difference in cost between the two, or $1.97. But the regular burger does not reflect the true cost of emissions generated in its production (usually in the form of methane released by livestock”.)[5]

The usefulness of the Green Premium

The Green Premium helps us measure the progress we have made in fighting climate change and identify the obstacles we have yet to overcome.”[6] This must be accompanied by the right choices such as encouraging the use of renewable energies, of which technologies have low green premiums. We still must take advantage of the decreasing cost of renewables, for example, in the United States the use of energy from non-emitting sources would only represent an extra fifteen percent of electricity costs for most homes.

Consequently, the objective is to prefer renewable energies because they play an essential role in carbon neutrality by 2050 in the United States. In this sense, it will be necessary to decrease the green premium through higher investments, for example, in research and development (R&D). This is to lower this premium and make these clean options more affordable as soon as possible[7].

What measures should be applied to reduce the green premium?

An article from Breakthrough Energy suggests three ways to achieve it[8]:

  1. The implementation of public policies by governments that make carbon-based technologies more expensive or make clean counterparts cheaper.
  1. Investment in research and development (R&D) by supporting clean energy startups and public policies that aim to lower the cost of reaching zero emissions.
  1. A carbon tax is used to balance the costs of clean and non-clean technologies by taxing carbon emissions.

In summary, the concept, though promising, needs to be widely disseminated to popularize green alternatives in homes. What happens in most cases is that citizens prefer to spend less money, for example, when buying household appliances without knowing the extra hidden costs of energy consumption and the environmental footprint of such devices. Greater available information may result in consumers´ preference for greener and more sustainable options.



[1] Coût actuel – Qu’est-ce que c’est, exemples, vs méthode du coût historique (wallstreetmojo.com)
[2] The Green Premium | Breakthrough Energy
[3] La Green Premium | Énergie révolutionnaire (breakthroughenergy.org)
[4] Qu’est-ce qu’une Green Premium ? – À travers le vert (acrossthegreen.com)
[5] La Green Premium | Énergie révolutionnaire (breakthroughenergy.org)
[6] Ibidem.
[7] Ibidem.
[8] Ibid.

A propos de Xue Catalina RODRIGUEZ CRUZ

Professionnelle en Droit et gestion des énergies et du développement durable.