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Remarks on the Economics of Sustainability. Richard A. Michelfelder, Ph.D. March 31, 2011. Today’s Discussion. What is “Sustainability”? Focus on water and energy 3. Why are we not “sustainable? Next speakers. 1 . What is “Sustainability”?.
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Remarks on the Economics of Sustainability Richard A. Michelfelder, Ph.D. March 31, 2011
Today’s Discussion • What is “Sustainability”? • Focus on water and energy 3. Why are we not “sustainable? • Next speakers
1. What is “Sustainability”? Using our natural resources efficiently in the long-run – nothing new here but the terminology! Problem: Resource prices reflect private cost only; ignores social costs
2. Focus on Energy & Water Asking an environmentalist what sustainability is like asking a physicist to define energy. My view is to focus on resources we can realistically impact: Energy & Water. Businesses, households & government use measureable & billable amounts of water & energy.
3. Why are we not sustainable? Water, electricity and natural gas prices are too low: Overuse water, electricity and natural gas Under-use conservation and alternative energy Prices set to cover average cost rather than higher marginal social cost.
3. Why are we not sustainable? Lack of information → High Required Returns Households & businesses require payback of few months to a few years or ROI’s of 30% to 378% on conservation . Comparable to venture capital investment where much investment is written off.