Boosting Cleantech With Cost-Benefit Analysis


This week, the Supreme Court is hearing a case, Entergy v. Riverkeeper, that will decide how big a factor cost is when it comes to utilities’ compliance with the Clean Water Act. Power plants, after all, use local water supplies to cool their facilities, which can have a substantial negative impact on organisms living in the water. The SCOTUS blog describes the issue succinctly:

The question before the Court was whether Congress in Section 316(b) had explicitly removed the consideration of costs and benefits from the calculation of the “best” technology, or whether the provision is instead sufficiently ambiguous to allow the EPA to use its discretion in considering costs and benefits.

The challenge in this case, however, is conducting a cost-benefit analysis when the “benefits” are environmental, not strictly economic. Both EPA and the utilities need a standard approach to measuring those costs. According to the SCOTUS Blog, Justice Breyer suggested that what is needed is “a way of [balancing costs] that they have some discretion over, that doesn’t involve some enormously elaborate thing — and that’s what I’m searching for.”

This question of how to value non-economic benefits is one that’s becoming increasingly common, as carbon markets, ecosystem services and triple-bottom-line accounting gain prominence in the business community. (You can read a longer piece from me about this here.)

Earlier this year, the Financial Accounting Standards Board — which dictates how publicly traded U.S. companies report their financial information — released a draft of new rules for disclosing business risk that included environmental liabilities. Such standards could help boost the comparative value of new clean technologies, by reducing the value of other, “dirty” industries. Should the court decide to affirm the value of water protection, Triple Pundit rounds up some interesting investment opportunities here.

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