The economics of “greenness”

By Apoorv Shaligram

Apoorv Shaligram
4 min readJan 24, 2022
Photo by Arteum.ro on Unsplash

In my earlier blog, I had touched upon the concept of cost of efficiency, something that isn’t exactly intuitive. In this one, we expand upon that idea and understand its implications on the greenness of any technology or product.

How do we measure the greenness of any technology?

In a lot of cases, the greenness of the technology is equated to the direct carbon emissions resulting from the technology or product’s manufacturing. However, when we start comparing competing technologies, we realize that the directness of carbon emissions varies with each technology, and hence comparison becomes difficult.

e.g., the common comparison between ICEVs and EVs:

  • EV enthusiasts say that EVs have lower emissions as compared to ICEVs at vehicle level (direct emissions at product level)
  • ICEV defenders/EV opposers say that emissions from power plants should also be added to the account of EVs
  • EV enthusiasts then counter it by saying that emissions from oil drilling to crude oil transportation to refineries to transportation of petrol/diesel should also be added to the account of ICEVs
  • ICEV defenders/EV opposers then add that the emissions resulting from battery production and the additional mining associated with it should also be added to the account of EVs…

Now, the question that arises is to what extent should indirect emissions be accounted for any particular technology to measure its greenness? When the question is posed like that, the obvious answer is that all possible direct and indirect emissions should be accounted for when we make a comparison, since the levels of indirectness will be different for technologies and a just comparison is not possible if we don’t account for all of them. It is equally difficult to compute the exact amount of emissions associated with a technology across its entire value chain, given that in the upstream value chain, there may be multiple products generated from the same operation. e.g., crude oil cracking and refining gives not only petrol and diesel, but also a host of petroleum products. How do we split the emissions originating at refineries between all those products? Is there an easily available metric that can give us a direct comparison between technologies?

Here I will add a hitherto unaccounted source of indirect emissions which is associated with every technology and product known to mankind: Humans!! Every technology and manufacturing process has human intervention at some level or the other, whether it is labor or engineering or designing or even sales & marketing. So, if we account for emissions occurring directly from processes and operations involved, why should we not account for the emissions associated with the human work force. e.g., If we account for the emissions associated with the transport of goods and the electricity used in factories, why should the emissions associated with the transport of humans (home to office/business trips/vacations) and their energy consumption (home air conditioning?) be left out of the calculations?? I get it that it becomes very very complex to account for all such things!! But then, if we are considering all indirect emissions, accounting for these is as important as any other!!!

Linkage between economics and greenness:

Surprisingly, we have a really simple metric to measure (albeit indirectly) the total emissions associated with any technology or product. It is like a summation of an infinite mathematical series giving a finite and elegant answer. The answer is the monetary cost associated with the technology or product! Every direct or indirect carbon emission source that we looked at above, has a cost associated with it (including the human source; we call it salaries and compensations :)). These total up to the cost of the product or the technology. Thus, the sum of the carbon emissions associated with the tech or the product are proportional to the cost of the product.

Hence, a direct measure of greenness of technologies is their monetary cost and as such, when we wish to compare technologies or products on their greenness, we should simply compare them on their Total Cost of Ownership (TCO).

Post Script:

Let us now look at that biggest of discussion point these days, and figure out if EVs are really greener than their ICE counterparts. Since we are now comparing them on TCO terms, EVs have an advantage now over ICEVs assuming a realistic lifecycle of the vehicles; which means that EVs are greener than ICEVs. ICEVs still hold the advantage on upfront cost (and hence emissions associated with the production of the vehicles), but EVs cover up that lead and more when it comes to operational costs. That we are spending less on electricity as compared to petrol or diesel is a direct metric of emissions associated with them.
So, yes. All the green technologies talked about are not greener than the incumbents until we can bring their prices down below that of the incumbents! By this metric, EVs were not green until recently, but are greener now; Solar wasn’t green until a point of time, but is now; Hydrogen fuel cells are barely greener as compared to petrol engines; and some of the other technologies touted as magical solutions are certainly not green!!!

Post-post script:

Personally, I really dislike that EVs are lagging behind ICEVs on the upfront cost as well. The difference is mainly the cost of batteries, and for EVs to match the upfront cost of ICEVs, battery prices will have to reduce significantly. I believe that there are ways of bringing them down considerably. Perhaps more on that in another post…

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Apoorv Shaligram

Co-founder & CEO, e-TRNL Energy Working on next-gen battery technology to kickstart the EV revolution…