The Green Premium refers to the additional cost associated with choosing a product, service, or method of production that is environmentally friendly compared to a less sustainable option. The concept is discussions about transitioning to a low-carbon economy. The term was popularized by Bill Gates to highlight the cost differential between green and non-green products and services, and it serves as an indicator of how far we need to go to make sustainable options more economically viable.

How does it works ?

The Green Premium quantifies the extra amount that must be paid to avoid greenhouse.

• For example, if a conventional petrol-powered car costs $20,000 and an equivalent electric vehicle (EV) costs $30,000, the Green Premium for the EV would be $10,000

This premium reflects not just the direct costs of the products but also the broader environmental and societal costs or savings associated with their production, use, and end-of-life disposal.

Are there any potential long-term benefits of the green premium ?

Some of key benefits might be concluded as:

For Businesses

• There is an increasing consumer and investor demand for green products and services (new market opportunities).
• Assets with green certifications can command higher prices and rental incomes.
• Create investment opportunities for investors to fund new technologies and innovations that can reduce the Green Premium over time.

For Consumers & Society

• It can improve the health and well-being of their users, being better quality of life and productivity.
• New job created in the renewable energy sector and other green industries.

Hard to implement the green premium

• Remain more expensive than their conventional because of failing to achieve the economies of scale to reduce production costs.
• Do not fully integrate sustainability into core business strategies.
• Operate in regions with weak or inconsistent environmental regulations.
• Consumers are unwilling to pay the Green Premium.
• Supply chains complexity.
• Financial constraints for small and medium-sized enterprises (SMEs).
• Multiple goals and objectives, especially in remaining competitive. Adding sustainability into the mix can make it difficult to achieve all goals.

Key Takeaways

Benefiting from a “Green Premium” involves paying extra for environmentally friendly options, reducing emissions and resource conservation, improving public, innovation and job creation in green industries. it still have dificulty to implementation and limitaions.

Disclaimer:

The views and opinions expressed in this Linkedin article are solely my own and do not represent the views or opinions of my current employer. This article is a personal reflection and does not involve any proprietary or confidential information from my current company. Any similarities in ideas or concepts presented in this article to my current company’s work are purely coincidental.

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