Companies are growing more confident about being able to charge high prices for low-emission products without worrying they’ll be displaced by cheaper, dirtier alternatives, says Chris Bryant for Bloomberg Opinion.
It’s a vital question for business leaders and investors to contemplate, as companies will have to spend trillions of dollars over the next couple of decades to eradicate carbon emissions. A so-called green premium for goods and services can help make those massive investments financially viable while giving companies an incentive to decarbonise sooner.
Green premiums exist due to the additional cost of rolling out clean technology in its infancy before scale economies are achieved. One approach to tackle the price gap between clean and dirty products is simply to hand companies billions of dollars in subsidies, as the US is doing with the. Reshoring and associated US labour shortages may, however, prove to be inflationary in the short term.
For example, the First Movers Coalition encourages member companies - among them Apple and Maersk - to sign advance purchase agreements for lower-carbon materials to make such projects easier to finance. Meanwhile, the Biden Administration’s buy-clean initiative directs the federal government to prioritise purchases of low-carbon steel, asphalt, glass and concrete.
Sustainability is “a new unique selling proposition, and of course, there is a premium price,” CEO Jan Jenisch boasted last week. “Investments in sustainability have super high returns.”Demand isn’t just coming from corporate do-gooders. Offices able to demonstrate green credentials enjoy a sales price premium compared with older, less energy-efficient workplaces that will require retrofitting.is emerging.
Green premiums feature in startup H2 Green Steel plan to raise more than 1.5 billion euros in equity funding for a hydrogen-powered steel plant in northern Sweden. H2GS has pre-sold steel to Mercedes-Benz, which is also an equity investor, and the luxury carmaker has committed to using the low-carbon material from 2025.
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