It’s all in the evolutionary game

Who would have thought that industrial ecology (IE) could be all fun and games! Well it can be, especially when talking about evolution and IE. Today we were divided in groups and received the assignment to design a game in order to understand the evolutionary process in relation to industrial ecology.  Before I will start on this fun part, I will first explain why evolution and IE are linked.

The linkage between IE and evolution is elaborated by an analogy. This analogy can give an evolutionary perspective to industrial ecology. This perspective contains certain elements. These are:

1. Evolution is a process of change.
2. This change happens through variation, reproduction and selection.

Especially this last element is of importance when drawing an analogy between the natural concept of evolution and the social problems related to IE. Therefore, the concepts within this element will be further explained and thereafter the analogy given.

Starting with variation. In biology variation means that there are different mutations of genetic material. In social systems variation comes in two forms. The first one is guided variation; in this kind of variation, there are different ‘mutations’ in the solutions for problems. These ‘mutated’ solutions derive from uncertainty, which is a necessary condition for variation. This uncertainty leads to different perceptions of the problem and the opportunities there are to solve the problem. For example, an IE problem is that fossil fuels are polluting our earth and the resources for these fuels are rapidly declining. Therefore, different alternatives for these fossil fuels need to found. A lot of companies addressed this problem, but all with different solutions. This is due to uncertainty about the best alternative energy resource. This leads to a differentiated focus among the companies and finally to a whole range of solutions. The second variation is called blind variation. This means that ‘mutations’ can also be the result of mistakes. These mistakes can either be positive or negative. However, blind variation is not very common when solving IE problems, because humans can oversee their actions. In both of the variations the solutions for problems can be found through single actor handling or through collaboration between actors.

Then, reproduction. Reproduction in biology is referred to as a-sexual or sexual production of new organisms with a non-changeable set of genes. The ‘social’ definition of production entails routinizing in order to preserve characteristics and transmitting these characteristics within a population by imitation or social pressure.  Routinizing happens, because companies are path dependent; meaning that when a company makes a certain choice for the direction of the company, every chose after that derives from this initial choice. Once a company decided to become sustainable, they will make choices that are in accord with this idea of sustainability. Further, transmitting can occur when an idea of a company catches on and other companies base their products on this idea. An idea can also be forced upon companies by the governmental legislation. This means that social pressure is responsible for transmitting a certain idea. This social mechanism does not only provide the government a way to exert pressure, but also provides the companies with means to influence the government. Within this feedback loop the companies can lobby to influence regulation or try to install barriers to prevent other companies from entering the market.

Last, the concept of selection or ‘survival of the fittest’. In de natural world selection ensures that the organism that are best fit to reproduce in a certain environment, will survive and the others will die. Almost the same happens with companies. The social environment sets the conditions or selection measures in which the companies have to operate. They have to take into account the government regulations, but also the availability of technology and knowledge. Next to these aspects, they also have to allow for the fact that not all policy or technology is aimed towards ecological strategies and that are difference in the power that these conditions and measures have on the companies. Within this environment the companies compete with each other and only those who have the characteristics that are best suited for the social setting will ‘survive’. Though this is not always the case when companies try to solve problems or address issues related to IE, such as sustainability. Sustainable innovations are often widely spread among a lot of companies. Hereby more companies are made suitable for the environment and thus less likely to be selected out.

Now all these concepts are explained and the analogy between the natural concept of evolution and the social problems related to IE is drawn, I can continue to the fun part! The game that our group designed, starts with defining the IE problem which the game will address. Our IE problem is: Fossil fuels are polluting our earth and resources to make these fuels are declining. The company in a certain country should provide the consumers with renewable energy alternative. Thereafter, the class will be divided into three groups.

1. The government consisting of a group of students.
2. The companies. They also consist of a group of students.
3. The consumers are individual students.

The government can set regulations. These regulations are based on the goal of the government. The goals could be set by:

1. The government itself.
2. By the consumers which express their concern about certain issues, for example nuclear power.
3. By companies who lobby for regulations which are favourable for their company.

On the bases of these goals the government determines whether they will tax or subsidies a certain type or energy. The goal of the government can change every year, so the companies and the consumers have to deal with uncertainty. In short the government defines the social environment in which the companies have to operate and the consumers have to make their decisions.

The companies can create a business plan to provide the consumers with renewable energy. In order to do so the business will receive seed capital. This plan can focus on three types of energy.

1. Solar PV. This is the most expensive option.
2. This is less expensive than solar pv, but costs more than nuclear.
3. This is the cheapest form of energy.

The business plan covering one these types of energy should consider the regulations of the government and they should also take the interests of the consumers into account. After each round the company can adjust their business plan in three ways:

1. Invest in marketing. This will costs the least amount of money.
2. Invest in the technology (more plants, turbines or panels or more advanced ones). This will be more expensive.
3. Switch to a different energy resource. When another company seems more profitable the company can choose to switch to their energy resource. The switch could also be made due to social pressure. This option will cost the most.

Next to these options the companies can lobby for favourable regulations.

In the first round the companies have to present their business plan and attract costumers. The business plan is drawn up on the bases of the idea the company has of the problem and their idea they have of the best possible solution. When the round ends they have to end up with enough money to adjust their business in one of the above mentioned options. If they don’t have enough money, they go bankrupt. This means that the company is not well adopted to their surroundings. In other words only the fittest company will survive.

The consumers can play in three different ways.

1. Buy energy from one of the companies. Every type of energy has a different price. This price is determined by the government regulations.
2. Invest in the company shares. This option has an up- and a downside. The downside is, this option costs more money than buying energy. The upside, however, is the consumer can also make money if the company flourishes….
3. Work for a company. In this case the consumer can earn money. However, the company has to spend money if they hire the consumer and therefore the consumer has to convince the company to hire them. This requires time and time is money, so when choosing this option the consumer loses a little money.

Just as the companies the consumers can also influence the governmental regulations by expressing their concerns about matters related to the energy supply.

These three actors will together form a dynamic game, which hopefully will contribute to understanding the evolutionary process in relation to industrial ecology.

References:

Boons, F.A. 2009. An evolutionary approach towards the strategic perspectives of firms, chapter 8 in: Creating ecological value. Cheltenham: Edward Elgar.

Increasing the use of LCA’s

In this blog, the four ways in which the government can increase the use of LCA’s will be shown. Hereafter Sabatier’s framework will be used to assess the potential effectiveness of external control vis-a-vis other options.

There are three options the government can deploy in order to implement certain things.

1. External control: : system controlling the elements of a social system
2. Threat of external control: the ‘shadow of hierarchy’ can provide a sufficient condition for actors to self-organize
3. Shaping boundary conditions: altering market conditions (tax, subsidy), altering available information (best practices, advertisements) and altering physical conditions (roads, borders)

Each of these options can be used to promote the use of LCA’s. Additional, another way can be used to stimulate the use of LCA’s.

1. First way

External control: Force companies to show the ecological footprint of the lifecycle of their products. The ecological footprint would entail the amount water and CO2 used in the entire life cycle of the product.

This alternative ensures that the government exerts its external control by influencing the system in which the businesses perform. By forcing the companies to show the ecological footprint, it becomes necessary for the companies to perform a LCA’s in order to show the necessary data on their products.

2. Second way

Threat of external control: Threatening to impose rules and sanctions if they do not themselves come up with ways to implement LCA’s.

Rules imposed by the government are often not as suitable for companies as ‘rules’ they formulated themselves. Therefore, companies will prefer to take action into their own hands and come-up with their own ways to implement LCA’s into the production process.

3. Third way

Shaping boundary conditions: Making the conditions in which the businesses perform more appealing for companies that perform LCA’s.

The government can stimulate the use of LCA’s by offering subsidies to companies which perform LCA’s on their product. By doing so, performing an LCA becomes an attractive option for businesses.

4. Fourth way

Strategies to promote competitive advantage.

There are, according to Hart, three ways to promote competitive advantage. The first one is: pollution prevention, the second is sustainable development and the third way is product stewardship. The pollution prevention minimizes the emissions, effluents and waste; the sustainable development minimizes the environmental burden of firm growth and development and the product stewardship is aimed at minimizing life-cycle cost of the products. To realize product stewardship as a strategy, it is necessary for the businesses to integrate LCA into the firm’s product-development process.

For this strategy to work, it is a requirement that the different companies involved in the production process cooperate. The government can stimulate this cooperation by stimulating the exchange of information among the supplier of raw materials, the different producers of materials and the distributers. By stimulating the exchange of information by, for example, offering compensation for the economic losses that might be accompanied by sharing this information, it becomes easier and more attractive to share the information. Subsequently, product stewardship will be integrated in the businesses and consequently, more LCA’s will be conducted.

The potential effectiveness of each of these options can be assessed by using the Sabatier framework. Sabatier argues that there are a number factors, divided in three categories, which affect the achievement of statutory objectives of policy throughout the entire process. These categories are:

1. Tractability of the problem (addressed by the statue)

1. Availability of valid technical theory and technology
2. Diversity of target group behaviour
3. Target group as a percentage of the population
4. Extent of behavioural change required.

2. Ability of the statue to favourably structure the implementation process
3. The incorporation of adequate causal theory
4. Unambiguous policy directives
5. Financial resources
6. Hierarchical integration within and among implementing institutions
7. Decision-rules of implementing agencies
8. Recruitment of implementing official
9. Formal access by outsiders

3. Net effect of a variety of ‘political’ variables on the balance of support for statutory objectives
4. Socio-economic conditions and technology
5. Media attention to the problem
6. Public support
7. Attitudes and resources of constituency groups
8. Support from sovereigns
9. Commitment and leadership skill of implementing officials

Evaluating each of the four ways to promote LCA’s with the framework of Sabatier, leads to the conclusion that the fourth measurement deals the most effective with the influential factors, shown in the framework. How the strategy of promoting competitive advantage deals with the factors will be shown in the next paragraphs.

First, the fourth strategy deals effective with the first factor of tractability. By compensating the losses that come along with the sharing of information, the technical information and technology about the life cycle of a product becomes available. At the same the cooperation among the businesses offers a solution to deal with the diversity of companies in the life cycle of a product. Moreover, the companies were already used to cooperate in order to produce the product, the enhanced cooperation will therefore not require extended behavioural changes.

Second, promoting competitive advantage is able to favourable structure the implementation process. The subsidies will give provide for the necessary financial resources needed for the implementation of the use of LCA’s. Additional, by integrating all the businesses which are involved in the life cycle of the product the use of LCA’s will be stimulated in all layers of the production process.

Third, the strategy is most capable to handle the variety of ‘political’ variables that influence the process of promoting the use of LCA’s. By compensating the firms for economic losses, the government ensures economic stability. Also, it uses the technology and information that is already available in the different sectors of production. Furthermore, it influences the attitudes of the companies, by stimulating the cooperation and not forcing them to comply with rules.

In short, promoting product stewardship is an effective way to promote the use of LCA’s.

References

Andersson, K. P. & Ostrom, E., 2008. Analyzing decentralized resource regimes from a polycentric perspective. Policy Sci, Volume 41, pp. 71-93.

Hart, S. L., 1995. A natural-resource-based view of the firm. Academy of Management Review, 20(4), pp. 986-1014.

Sabatier, P. & Mazmanian, D. D., 1980. The implementation of public policy: A framework of analysis. Policy Studies Journal, 8(4), pp. 538-560.

Regional network

Samsø is a Danish Island, which is not attached to the main land. Due to this geographical position the island always has been independent. Furthermore, the island never had the feudal system and as a result the inhabitants of Samsø are used to owning a piece of land. Moreover, the island has socially been quite stable, which has led to a cooperative society on the island.

This basis led to the initiative in 1997, to compete in the contest to become a renewable energy island. Samsø won this competition and started to take measures to switch the island’s energy supply to renewables. From 1997 until 2007, with large community cooperation, they successfully implemented eleven onshore wind turbines, ten offshore wind turbines, one solar plant and 3 straw fired plants. From 2007 onwards the island tried to become completely independent of fossil fuel

In the progress towards a renewable energy island there were a number of actors involved:

• Danish government
• The EU
• The initiator of the Soren Hermansen
• The Samsø municipality
• The energy companies
• Chamber of Commerce
• Agriculture
• Tourist sector
• Offshore investors
• Ferries
• Citizens of Samsø

The most important actors were the Danish government, the EU, Soren Hermansen, the Samsø municipality and the citizens of Samsø. As the project progressed, the Samsø municipality and the citizens became more important and the EU, the Danish government and Hermansen became less important. Furthermore, a number of new stakeholders came into play. These new actors were: the financial institutions, the tourists and the transport sector.

The initiative for the contest came from the EU, which tried to anticipate to its goal of reaching the 20/20/20 goals by giving subsidies to islands which would become renewable energy islands. The Danish government wanted to opt-in in the contest and saw Samsø as a viable option. After this was known the initiator on the island, Soren Hermansen, with the help of the municipality, tried to engage the community on the island into turning the island into a renewable energy island.

As can be seen from the paragraph above, the project was dependent on local actors and non-local actors. Transforming the island was initiated top-down by the non-local actors, the EU and the Danish government and stimulating the measures was done bottom up by Hermansen and the citizens.  Due to this combination it can be argued that the network on Samsø was a combination of a social network with high levels of self-organization and selection pressures from governmental organizations.

The business of business is to increase its profits

According to Friedman the social responsibility of business is to increase its profits. He provides arguments for this standpoint by saying that business are only responsible to protect the interests of the company and can only spend money of stakeholders and consumers in line with the interests of these groups. Subsequently, Friedman argues that if a company spends the money distinctive from the interests of the stakeholders and consumers the company is enforcing taxes. Taxes, according to Friedman, can best be enforced by governments, because they are subject to political principles, such as checks and balances. Furthermore, he argues that businesses have too little information and knowledge to determine which social responsibilities are important and how they should be executed. Finally, Friedman concludes: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”.

I agree with Friedman that business should engage in activities to increase its profits, because this is in the best interest of the company, the stakeholders, the employees and the consumers. Furthermore, I agree that taxes should be executed by a government subject to checks and balances. However, I do think that it is possible for a business to increase its profits and still be socially responsible. Especially with regard to reducing its environmental impact, studies of the Rocky Mountain Institute showed that a business can both increase its profits, while at the same time be social responsible. By taking measures within the production cycle of the company to reduce the amount of material, water or energy, the company can save money and lower its ecological footprint. Furthermore, a business can reduce the amount of energy their offices use by retrofitting the lamps and heating- and cooling system. By doing so, the company saves money and reduces its environmental impact, while saving a lot of money.

In short, business do not have to choose between increasing its profits and being socially responsible, there are ways in which the two things can be combined. Moreover, this combination, over time, ensures higher profits and a better world.

Sources:

http://www.rmi.org/RetroFit

Nokia

What was your first mobile phone? There is a big chance it was a NOKIA 3310; An indestructible phone, with its distinctive ringtone and off course snake! Since your first phone, mobile phones have rapidly developed.However, the technology is not the only thing that has changed. The business strategy of the mobile phone producers has also altered over the years. An example of a mobile phone producers that has changed is Nokia. From 2002 onward the company has started to incorporate social responsibility into its policy and from 2008 it sees sustainability as one of the important points in its business strategy. Due to this renewed focus the production processes of Nokia had to become more environmental friendly and the resources needed to become more sustainable. The first part could be done by Nokia itself, but the last part required the cooperation of the suppliers. Nokia tried to achieve this cooperation by coercing the supplier to comply with the new sustainable strategy. One of the reasons Nokia adopted this strategy and coerced its supplier, is its strive for legitimacy. Suchman defined legitimacy as “the extent to which the activities of a firm ‘are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions”. Following this definition it can be explained how and why Nokia strived for legitimacy.

First of all, sustainability has increasingly become a more important norm in society. More and more companies have been following this norm and incorporated sustainable strategies. This made Nokia realize, since sustainability had became a dominant business strategy, it had to comply to the sustainable norm, in order to remain its legitimacy.

As mentioned before, Nokia needed its suppliers to become sustainable in order to be more environmental friendly. Most of the suppliers of Nokia highly depend on Nokia for its sales and therefore are highly depended on Nokia. For this reason the supplier complied to the sustainable strategy.

From this mechanism it is visible that the field in which Nokia is active is self-organized. An organizational Field is defined by DiMaggio and Powell as “a set of organizations that, in the aggregate, constitutes a recognized area of institutional life; key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products.” Self organization is, according to De Wolf and Holvoet “a dynamical and adaptive process where systems acquire and maintain structure themselves, without external control.” These aspects can be found in the ‘corporate governance’ organization of Nokia. This type of organization entails an focus on human interaction in which the employees and the customers play an important role. Hence, norms, values and beliefs which are important to these groups can easily be implemented in the business strategy of Nokia and from there on expended to its suppliers.

Nokia was quite effective in expanding this strategy to its suppliers, due to the centralization of resource supply and the dependency on Nokia of the suppliers. However, Nokia still could not coerce of persuade the entire supplier field, due to the fact that not all the suppliers are dependent on Nokia for their sales. Over time this changed, because of the combination of two phenomena. One, the sustainable norm is society became more and more important and two the more suppliers became sustainable, the more this strategy became a example for the other suppliers, creating a field structure over time. This mimicry resulted into a isomorphic supplier field.

Along side this mechanism, other mechanisms could enhance the implementation of sustainable strategies. External control from, for example, the European Union could implement regulations that require products to be more environmental friendly and even exclude products from companies that are not willing to comply to these new regulations . As a result Nokia will feel the pressure from the new regulations to implement sustainable solutions.

The best way to make an entire system  more sustainable, is to use a combination of self-organization and external control. Which of these mechanisms needs to be implemented first, depends on the system itself. If the system is effective in its self-organization and thus capable of making the system more sustainable without governmental influence, external control is only necessary to ensure the last steps or to work as a catalyst to speed up the process towards sustainability. If the system is not as well self-organized, external control might me necessary. This could either be in the form of threatening to enforce rules and regulation in order to ensure that the system starts to make their own ones, or by implementing rules and regulation to force the system to comply with the new sustainable norm.

Sources:

Boons, F., 2014. SSPM markets, Delft: Delft University of Technology.

DiMaggio, P. and Powell, W. 1983. The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields, American Sociological Review, 48(2): 147-160.

Holvoet, T. & Wolf de, T., 2005. Emergence Versus Self-Organisation: Different Concepts but Promising When Combined. In: S. A. Brueckner, et al. eds. Engineering Self-Organising Systems. Heidelberg: Springer Berlin, pp. 1-15.

NOKIA, 2014. Corporate Governance. [Online] Available at: http://company.nokia.com/en/about-us/corporate-governance
[Accessed 13 October 2014].

Nokia, 2014. People Planet. [Online] Available at: http://company.nokia.com/en/about-us/people-planet
[Accessed 13 October 2014].

Suchman, M., 1995. Managing Legitimacy: Strategic and Institutional Approaches. The Academy of Management review, 20(3), pp. 571-610.

The Dutch ‘Energieakkoord’

Last year more than forty organisations, including the Dutch government, employers, trade unions, environmental organisations, financial institutions and other social organisations, drafted the ‘Energieakkoord’. The Energieakkoord is an accord on sustainable growth and entails agreements about energy savings, clean technology and climate policy and aims at affordable and clean energy, employment, and creating chances in the clean tech business for the Netherlands.

Drafting such an accord is a difficult and complex job, especially, because of the high number of actors involved. All the actors have different interests and preference order, but also have different institutional and organisational settings. This results into different preferences among the actors which lead to certain actions. This actions are the result of a decision-making process, which can either be explained by the rational choice model or bounded rationality as constituted by Jones.

In the following paragraphs the theories will be briefly introduced and applied to the drafting of the Energieakkoord.

The rational choice model. The rational choice model focuses of the role of individual actors in events and outcomes of decision-making processes. Furthermore, it views actors as rational beings and has a number of key assumptions:

• Outcomes and events are the result of attitudes, expectations and interactions of individual actors
• Actors have their own subjective view (beliefs) about the world
• Beliefs are as well supported as possible, given the evidence
• An action is optimal, given the beliefs about the world
• Actors have preferences in which they can make a ranking according tot certain logical criteria
• Actors are rational, meaning that they make decisions that are the best way to achieve their goals
• Actors act according to their self-interest and may try to hide their resources and strategies

The theory of bounded rationality states that actors are not perfectly rational beings, but have to deal with uncertainties and have limited calculative capacities. Due to this the actors are unable to oversee all the consequences of their actions. Furthermore, the theory states that the actors are unable to consequently rank their preferences. Jones applied the theory of bounded rationality to the organisational level and did this on the basis of a set of principles. These principles are:

• Organisations code experiences into routines, rules, and standard operating procedures
• Agenda setting is a process of prioritizing external stimuli
• Parallel processing of information through delegation and decentralization via routines
• Serial processing: when routine solutions are deemed insufficient, central decision-making takes place
• Emotions and ‘contagion’ are crucial in central decision-making
• People identify with their organisation and its routines/solutions. This makes change difficult

To start, the rational actor model will be applied to the drafting of the Energieakkoord. The accord is the result of the cooperation between more than forty actors and thus the result of the attitudes, expectations and interactions of these actors. Every actor has a certain attitude about what the goal of the accord should be and how it should be achieved. Also, the different actors had different expectations on what and how the accord would benefit themselves and the Netherlands. These attitudes and expectations can greatly differ from actor to actor. This due to the different view and beliefs the actor hold about the world. For example, the financial institutions focus on economic profit for the Netherlands, because they belief a strong economy is essential for the Netherlands. While on the other hand the environmental organisations are more concerned with the production of energy from renewable energy sources, because the value the environment and want to prevent climate change. They generated their views by conduction evidence, either from inductive or deductive research.

On the basis of the belief about the world of the actor, the actors decide which aspects they think are important for the accord to focus on. Which of these aspects are most important are decided upon by drafting a preference list. This process is done before the drafting of the accord started, so that at the beginning of the draft, each actors knows its negotiable and non-negotiable points.

During the drafting of the accord, the different actors interacted with each other. Hereby, they make clear to the other actors what they think the accord should focus on. In this process each of the actors makes decisions on how to interact  by deciding what the best way is to ensure that their focus point will be included in the accord. This can be seen from the way certain pillars and goals of the accord are stated. By changing the formulation of certain aspects, an actor can still achieve its goal of, for example, renewable energy, while also satisfying other actors, by stating that investing in renewable energy will create jobs or broaden the market for new investors. If the actors do this in an unobtrusive way, the actor might receive what is in the best of its own interest.

All the actions mentioned above are not merely formed by the actor itself, but also by its social environment. This surrounding is called ‘structure’ and includes the social, institutional and organisational setting in which the actor is resided. Although, the rational choice model recognizes the role of this structure in the sense that structure determines the range of options open to the actor, it ultimately states that the actor its decisions are decisive for the outcome of the event. The theory of bounded rationality by Jones does address the role of the social, institutional and organisational setting. Therefore, the theory of bounded rationality of Jones will be applied to the drafting of the Energieakkoord.

The actors involved in the drafting of the Energieakkoord all have a different institutional and organisational setting in which they have to justify their actions. Within the organisation of each of the actor their are certain ways of how things are handled. For example, it might be difficult for the representative of the environmental organisation to be in favor of including nuclear energy in the accord, although the evidence points out that is a sustainable solution, the environmental organisation views nuclear energy as non-sustainable. Furthermore, will the actors identify with the routines within their organisation. This means that trade unions will try to strive to include beneficial options for employees by handling the negotiations in the drafting process in a certain way.

From each of the theories it is visible that drafting a accord with a lot  of actors is a complex process in which both the social, organisational and institutional setting, as well as the self-interest, beliefs and preference order of the actors plays a role.

Sources:

Hindmoor, A., 2006. Rational Choice. Hampshire: Palgrave Macmillan.

Jones, B. 2003. Bounded rationality and political science, Journal of Public Administration Research and Theory 13(4): 395-412.

Boons, F. slides college 19 september 2014

http://www.energieakkoordser.nl/energieakkoord.aspx

http://www.energieakkoordser.nl/~/media/files/internet/publicaties/overige/2010_2019/2013/energieakkoord-duurzame-groei/energieakkoord-duurzame-groei-samenvatting.ashx

 

Decrease demand and increase supply

We are living in times in which time is running out. The climate is changing and resources are depleting, while at the same time the demand for food and water is rising. In order to deal with the combination of these situations, we need to switch to more sustainable solutions for the production of food and water.

Every production process, even sustainable ones, require energy and therefore the price of the production is linked to the price of energy. The price of energy is determined by demand and supply. When the demand is high, the price will be high, if the supply, relatively to the demand, is large, the price will be low. So we can choose to increase the supply of energy or choose to decrease the demand for energy. The former option requires to either find more or sources of energy or to use more renewable energy. Since the oil and gas fields are depleting and we reached the point at which the production of oil peaked, finding more oil and gas is not very likely. Therefore, more renewable energy should be used. However, in order to have enough electricity generated from renewable sources at which the price of energy will go down, a lot of material and space is needed. All this material and solutions to reduce the amount of space needs to be produced. To produce all this, a lot of energy is needed. So, in short, merely trying to increase the supply, will not decrease the price. Therefore, the demand of energy has to decrease. Decreasing the demand, will make the supply relatively larger and thus will lower the price of energy and thus the production costs will decrease. With a decreased production price, switching to more sustainable solutions becomes a viable option.

So, then the question rises: How do we decrease the demand of energy? There is a simple answer to this question: use less energy. Although the answer is simple, we are still not decreasing our demand for energy. Subsequently, another question rises, why are we not decreasing our demand? There are three explanations for this question:

– Households and consumers have not changed their behaviour towards the usage of products and energy

Households still use products which require a lot of energy and waste energy, due to poor insulation and single glazing. Consumers buy products to often and do not recycle their old products. This results into more production of goods and constant mining of resources.

– A lot of energy is wasted during production processes

Factories are one of the biggest users of energy. Although they try to minimize the use of energy for the production process, a lot of progress can be made in the usage of waste heat or other output products, which contain energy.

– Most of the energy used in urban areas is used in office buildings, shops and showrooms and they are not decreasing their energy use

Due to inefficient use of energy, offices, buildings and showrooms use a lot of energy. Most of the time these buildings are poorly insulated or use inefficient lighting. This results into high energy bills for these buildings.

Sources:

http://www.huffingtonpost.com/elliott-negin/the-time-for-wind-and-sol_b_5208289.html

http://blog.rmi.org/thesustainabilitypuzzle