From ‘Green’ to ‘System’ Premium
The Green Premium oversimplifies the definition of ‘green’ and will fail to drive sustainable development. System Premium is the solution.
Summary
My previous piece summarised Bill Gates’ ‘Green Premium’ and argued that sustainability advocates should acknowledge its presence and support businesses to talk openly about it. Further, they should pressurise governments to drive its reduction towards zero as part of their sustainability strategies.
However, it is crucial that businesses and governments alike shift from ‘Green Premium’ towards ‘System Premium’. This change will address the overly narrow definition of ‘Green’, incorporate the potential social trade-offs of climate action into decision-making, and drive economic welfare first and foremost, rather than any form of production and consumption.
1. The definition of ‘Green’ is too narrow
Bill Gates’ ‘Green’ refers to the reduction of emissions to net zero. The reduction of such emissions would solve many — but not all — of the challenges faced by the nine processes which regulate the stability and resilience of the Earth system. These nine planetary boundaries articulate the space within which humanity can continue to develop and thrive: crossing any of these boundaries increases the risk of generating large-scale abrupt or irreversible environmental changes. One boundary already passed is extinction rate, one of two indicators for ‘biosphere integrity’ (loss of biodiversity). By defining ‘Green’ solely on carbon emissions, Gates implies a desired destination of a decarbonised world, rather than one in keeping with all planetary boundaries.
2. The Green Premium doesn’t reveal potential trade-offs involved in its reduction, failing to drive informed debate.
Reducing the Green Premium may also result in significant negative social consequences which undermine the globally agreed pursuit of sustainable development (also an objective of Bill Gates). A recent report revealing the connection of Uyghur forced labour with solar panel supply chains is one example of human costs resulting from the reduction of the Green Premium, as human and environmental impacts were not considered simultaneously. As the concept currently stands, there is no way to account for the social or environmental trade-offs which may occur in the pursuit of a reduced Green Premium.
3. The Green Premium assumes that any (decarbonised) production and consumption equates to increased economic welfare, which is not true.
The Green Premium concept assumes that any production and consumption is good, and they need only be detached from emissions production. This is not always the case: many products and forms of consumption cause rather than solve problems. For example, a large corporation holding both fast food providers and slimming brands in its portfolio, or the financial industry selling both cheap loans and payment protection for those who can’t afford them, are signs of ‘failure demand’ or ‘post-growth overstretch’. The demand for the latter product in both cases is the result of the supply of the former, meaning that companies profit from creating and ‘solving’ a problem which need not have been created at all. The Green Premium therefore evidences the cost difference between net-zero fast food and high-emissions fast-food, but does not account for the resulting costs to people’s health and national health services.
Towards System Thinking
Shifting from ‘Green’ to ‘System’ Premium solves these three problems:
- Emissions are replaced with a more comprehensive approach to ‘green’, which embeds the planetary boundaries;
- Trade-offs are accounted for by integrating social impact within the metric;
- The target of decarbonisation, production and consumption, is replaced with a different kind of growth — that of economic welfare.
The ‘System Premium’ could be defined as the difference in cost between a product that creates system value, and an alternative that doesn’t. System value is created when a company reaches a state of future-fitness, whereby the 23 Break-Even Goals (grounded in systems science, including the Planetary Boundaries) below are achieved. A company with forced labour in its supply chain would not create system value even if its products were contributing towards decarbonisation: all negative impacts must be reduced before this claim can be made.
With regards the third issue on growth, there are four different types.
The first refers to the amount of raw materials we take out of (and put back into) the environment. On a finite world, indefinite growth of this type is not possible. The second is the amount of goods and services flowing through society, which is roughly what GDP measures. This is the type of growth Gates refers to. The third represents people’s capacity and opportunity to lead a fulfilling life — and in particular the degree to which basic needs are met.The fourth is concerned with the amount of biomass (fish, wood etc.) that regenerates through natural processes such as photosynthesis, and the health of the ecosystem functions (fresh water, fertile soil etc.), which enable that regeneration. It equates to growth in raw materials available for consumption (e.g. wood, fish, healthy soil which can produce nutritious food).
Growth Types 3 and 4 are unequivocally good as they contribute directly to sustainable development. While reducing the Green Premium to negative would incentivise Type 2 Growth, it may undermine Type 3 and 4 Growth. For example, a beer company might be carbon-neutral but contribute to water scarcity, all while promoting irresponsibly high drinking, undermining natural resources and economic welfare. Reducing the system premium would dis-incentivise the subset of Type 2 Growth which also undermines Type 3 and Type 4 Growth. Moreover, it would incentivise the subset of Type 2 Growth which also increases Type 3 and 4 (e.g. a beer company that meets all Break-Even Goals).
The System Premium should replace the Green Premium to guide action by revealing where changes in policies and investment into innovation are most required to close the cost gap. By shifting from ‘Green’ to ‘System’, all ecological limits will be accounted for in the transition to a sustainable world, negative social and environmental trade-offs of decarbonisation noticed, evaluated and reduced, and production and consumption geared towards economic welfare.
The author’s approach to writing
Thanks for reading this far. I publish these thought pieces not because I adamantly believe in the argument, but because it’s where I’ve arrived based on current reasoning. I’d love to hear your response, make improvements and be part of collective climate action. Please leave a comment or email me at annamurphy41534@gmail.com. Thanks, Anna
Remaining questions
- How can we actually start measuring the ‘System Premium’?
