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The Ecological Allowance of Enterprise Dr. André Reichel Scientific Coordinator GSaME Associate Cluster Director . Barbara Seeberg Doctoral Student GSaME. What size is right?. MU Marginal Utility. Economic growth. Uneconomic growth. b = sustainable scale (MD = MDU).

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The Ecological Allowance of Enterprise Dr. André Reichel Scientific Coordinator GSaME

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The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

The Ecological Allowance of Enterprise

Dr. André Reichel

Scientific Coordinator GSaME

Associate Cluster Director

Barbara Seeberg

Doctoral Student GSaME


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

What size is right?

MU

Marginal Utility

Economicgrowth

Uneconomicgrowth

b = sustainablescale (MD = MDU)

Marginal Utility MU

e = futilitylimit (MU = 0)

a

MU = 0

d = catastrophylimit (MDU = )

ab = bc

e

d

b

c

Material throughput

Marginal Disutility MDU

MDU

Marginal Disutility

MDU = 

Source: Daly, H.E.; Farley, J. 2003. Ecological Economics: PrinciplesandApplications. Washington DC: Island Press


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

Business in the balance

1. Boundarycondition

2. Boundarycondition

Economicbalance

Revenues Costs

Ecological balance

Impact  Allowance


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

Case of uneconomic firm growth

IdeaEvery firm has the right to use ecological space in relation to (1) absolute ecological boundaries and(2) its economic value added

Ecological boundary at hand: Global cap on CO2 emissions, roughly some 750 Gigatonsbetween now and 2050

Economic “allocator” variable: Gross value added (output approach of GDP accounting)

ProductAllowance

873 Million private cars (2007)

  • 2,075 Billion US-Dollar (2008)

778 Million tonsCO2

891 kg CO2 per vehicle and year

Industry in focus: Automotive


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

Case of uneconomic firm growth

Pick a firm from the automotive industry:

Calculate CO2 intensity throughout average product’s lifecylce(data from internal Lifecycle Assessment report)

Product Impact

ProductAllowance

170 g CO2 per km

1,833 kg CO2 in production

12,000 km travelled per year

2,040 kg CO2 per year in use

430 kg CO2 end oflife

2,228 kg CO2 per year

891 kg CO2 per vehicle and year


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

Strategic framework for ecological allowance

Impact  Allowance

Impact  Allowance

Rightsize Business

Ecological Excess

Increasingallowance

  • Reducing product sales and product population (dominant strategy)

  • Reorientation on longer lifecycles and/or product use

  • Technology (Eco-efficiency and eco-effectiveness)

  • Increase value added at the expense of other firms or industries

  • Economic competition for “ecological space”

  • Reducing product sales and product population

Revenue  Costs

Reducingimpact

Economic

Loss

Eco-Eco Disaster

Revenue  Costs


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

Prospective case of economic growth?

Product impact of a Smart: 1,628 kg CO2per year

Replacement rate of carsharing ~ 1:4 to 1:8 private cars

Potential for CO2 reduction ≥ 80%

“Virtual” impact of car2go:

407 kg CO2per vehicle and year

2.228 kg CO2Impact of old business model


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

Modeling (un-)sustainable businesses


The ecological allowance of enterprise dr andr reichel scientific coordinator gsame

“The automotive industry need not worry, but it will have to make cars that consume dramatically less fuel. The great green vision is to transform this strong industrial region into a country with green product lines. We want to prove that economy and ecology can go together without destroying our livelihoods, economic as well as ecologically… Fewer cars are of course better than more. We cannot continue to sell just cars but have to move on to mobility concepts; this includes walking, cycling, driving cars, and using public transportation. We have to build intelligent mobility networks in order to stay mobile without destroying the environment. We have to show here in Baden-Württemberg that prosperity without destruction is possible. That is our responsibility, that is why a Green is going to be Prime Minister. Otherwise the others could do it!”

Winfried Kretschmann, PM-elect of Baden-Württemberg


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