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Green payoffs?
October 13, 2008

Posted by CindyW in : Opinions & Thoughts , trackback

I had lunch with a former coworker and friend Ben last Friday. We were sitting by the window, eating our sandwiches, and updating each other with kids, work and life.

A Prius car stopped at the light outside the window. Ben scrunched his face and snorted, “Do you know what I do when I see a Prius?”

“Admire it?” I had no idea why anyone would do anything specific to a Prius.

“Whenever I see a Prius on the highway, I floor the gas and show the driver how wimpy his car is,” Ben bragged.

“Why?” honestly I was puzzled.

“I don’t like green people. They really bother me. You know, I am just suspicious of their real motivations,” Ben was frank.

“What do you think their motivations are?” now I was very curious about the whole thing.

“They think they are morally better than everyone else. The Prius itself is a giant bumper sticker, screaming ‘Look at me, I am green!’” Well, I suppose that was one way of interpreting it.

I suggested an alternative view, “What if I buy a Prius because it cuts down my gas expense and it allows me to drive in the carpool lane?”

Ben thought about it for two seconds, “Good point. Then it’d be okay with me, because it is a rational decision, not a moral show-off. By the way the break-even point for owning a Prius is when the gas is around $4 per gallon.”

Our discussion so far betrayed the business training and experience both Ben and I had. Consumers generally make rational economic decisions. There is always a calculatable payoff with the price they pay. To Ben, the payoff of driving a Prius is either gas savings or a moral superiority complex.

“What about people who drive BMWs?” I asked.

Ben came back without blinking, “That’s just sheer vanity at play. They are announcing to the world that they are rich and successful,” he continued after seeing my sneer, “Their payoff is so blatantly obvious, straightforward and easy to understand.”

“So you are more comfortable with shallowness and vanity than your perceived moral superiority?” I pushed him.

“Vanity is a natural human frailty and completely predictable. The whole being green thing is irrational and therefore unsustainable,” Ben seemed to have an answer to every question.

We continued our now sort of philosophical discussion. He said, “CFLs make sense because the savings in utility expense exceeds the cost of the bulbs. Solar roofs don’t make any sense because it takes too long for consumers to recuperate the upfront expense.” Ben was ready to make the rough estimate on the napkin.

I began to understand that he was not necessarily opposing being green. He needed spreadsheets to show him some sort of payoff from being green.

“How about buying second-hand items instead of new things for environmental reasons?” I mentioned “Story of Stuff”.

“Bah. If there weren’t new things, how could there be second-hand things? Plus, it reduces demand on production. We don’t need this in our financial condition today.” Ben was going by the traditional economic theory – consumption generates demand which stimulates production. The end result: everyone is rich and happy.

I pointed out to him that the traditional economic theories assumed unlimited natural resources (water, minerals, forest, space to live, top soil to plant, etc.) and zero-cost for harmful byproducts of production and consumption (CO2, landfill, many other pollutants).

He acknowledged that it was a RATIONAL point. But until there were well-established economic theories that factor in the resource and cost of byproducts, the traditional theories were still the gold standard.

There was also the intangible happiness factor. “How about that being the ultimate payoff?” I argued. Perhaps happiness should be factored in economic theories, as difficult as the calculation might be. Perhaps the seemingly morally superior motivation of “green people” was really just one of the facets of happiness. They might derive abundant happiness knowing that our world was beautiful and sustainable for them and for their children.

“Yeah, I suppose so,” Ben admitted many imperfections of the “gold-standard” economic theories but remained to be skeptical of green people’s “motivations”.

After our lunch, we walked to our respective cars. As I beeped my Prius, Ben bent over laughing and said, “I am gonna choose to believe that you are a rational being with gas price and carpool privilege in mind.”

I gave him a hug and laughed too, “Maybe I am just morally superior to you.”

As much as I disagree with Ben’s straight rational interpretation of everything, I always enjoy talking with him. Part of it is that he provides a different perspective to my own. Part of it is that he is right in terms of incentives and motivations.

I would venture to say that most of us respond to financial incentives. Recently I read “Earth: The Sequel” which provided an amusing example of incentives. German government required that utility companies buy electricity from renewable-producers, including owners of rooftop systems, at above-market rates. “In 2007, German utilities paid up to 72 cents per kilowatt-hour for solar energy, about triple the price at which they sold energy back to consumers.”

Not surprisingly, solar panels sprang up on lots of roofs. Hey, at that rate, who wouldn’t want to put up a cash-generating system, even in the not-so-sun-filled Germany.

The next 5-10 years will be a fascinating and critical time in our political system. Not only will we need the will power to confront global warming, we also need to navigate various incentives, subsidies, and tariffs to encourage green behaviors and discourage environmentally destructive behaviors.

CindyW at Organicpicks

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