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Sustainable Future

‘Green’ Premium Explained

If you have all the intention to fight the climate fight but are constantly bogged down by the hole Green products burn in your monthly budget, we understand. Green premium is one of the key deterrents to large scale adoption of eco-friendly products. Let us explore why it exists and what you can do about it.

The term “green premium” refers to the additional cost associated with choosing environmentally friendly or sustainable alternatives over conventional, less sustainable options. In the context of products or technologies, the green premium represents the extra expense incurred when opting for solutions that have a lower environmental impact, higher energy efficiency, or other sustainable attributes.

Reducing the green premium is crucial for the widespread adoption of sustainable practices, as the cost factor often plays a significant role in decision-making for businesses and consumers. Several articles and studies have explored strategies to minimize or eliminate the green premium. While I cannot provide direct citations, I can guide you on topics and areas where you can find relevant information:

  1. Government Policies and Incentives: Many studies discuss the role of government policies and incentives in reducing the green premium. Incentives such as subsidies, tax credits, and grants can help level the playing field between sustainable and conventional options.
  2. Economies of Scale: Articles explore how increased production volumes and economies of scale can lead to cost reductions for sustainable technologies and products. As demand grows, manufacturers may achieve efficiencies that contribute to reducing the green premium.
  3. Technological Innovation: Research on technological advancements in sustainable solutions often addresses the potential for innovation to drive down costs. This could include improvements in manufacturing processes, material science, and design that make sustainable alternatives more cost-competitive.
  4. Consumer Awareness and Demand: Studies on consumer behavior and awareness highlight the role of demand in influencing market dynamics. Increased consumer demand for sustainable products can drive competition and encourage businesses to find cost-effective solutions.
  5. Life Cycle Assessments (LCAs): Articles discussing life cycle assessments provide insights into the comprehensive analysis of a product’s environmental impact throughout its life cycle. Understanding the complete life cycle can help identify areas for improvement and cost reduction.
  6. Supply Chain Efficiencies: Exploration of supply chain management practices and efficiencies can reveal opportunities to reduce costs. Sustainable sourcing, efficient logistics, and reduced waste in the supply chain contribute to lowering the green premium

Unfortunately, it is a vicious cycle, green products can not be cost effective until they are adopted at large due to economies of scale. Until we accept the short term nature of this premium on the products that can save our planet, we will not be able to make the change. We need to overlook the short term effects of this premium as a consumer for the long term cost benefit on sustainable products.