It warms my heart to know I am not totally insane

My editorial

This is a rainy morning in Amplepuis, France, where I am staying until tomorrow. I am meditating, which means I am thinking without pretending to think anything particularly clever. Just basic, general flow of thinking, enough not to suck my thumb, sitting in a corner. I am mentally reviewing that report by Sebastiano Rwengabo (Rwengabo 2017[1]), which I commented on in my last two updates, and in some strange way I keep turning in returning in my mind that formula of multiple probability by Thomas Bayes (Bayes, Price 1763[2]), namely that if I want more than one success over n trials, at some uncertain, and therefore interesting action, I have always more than one way to have those p successes over n trials. Thomas Bayes originally equated that ‘more than one’ to (p^q)/q!, where q is the tolerable number of failures. You can try by yourself: as long as you want more than one success, your (p^q)/q! is always greater than one. There is always more than one way to have more than one success. Interesting intuition.

I am digging into the topic of local power systems based on renewable energies, possibly connected to a local cryptocurrency. I want to prepare something like a business plan for that idea. I want to know how many ways of being successful in this type of endeavour are reported in the literature. I start with a leaflet I found and archived on my https://discoversocialsciences.com website under this link . It is entitled ‘100% – RES communities’. As usually, I start at the end, and the end is sub-headed ‘Stay in The Game’. Good. If it is important to stay in the game, then logically it is important not to drop off, which, in turn, means that dropping off is an observable end to local efforts at going 100% renewable. One of the ways to stay in the game consists in joining other people who want to. There is a network, the Global Covenant of Mayors (http://www.globalcovenantofmayors.org ), which currently unites 7 477 cities with almost 685 million people living in them and which has been created quite recently by the merger of the Covenant of Mayors, mentioned in that ‘100% – RES communities’ leaflet, with the Compact of Mayors, in June, 2016. Having more than one success in going 100% means, thus, staying in the game with others, in networks, and those networks tend to merge and create even bigger networks. I have a nice conditional probability, here: my probability of successfully going 100% green, as a local community, depends on the probability we manage to stick to our commitments, which, in turn, depends on our ability to join a network of other communities with similar goals. There are other networks, besides the Covenant of Mayors, such as the RES League (http://www.res-league.eu ), 100% RES Communities (http://www.100-res-communities.eu ), or the French RURENER (http://fr.rurener.eu ).

The next thing, which apparently helps to stay in the game is a SEAP, or Sustainable Energy Action Plan. As I am writing this paragraph, I am browsing the Internet in the search of details about this approach, and I am simultaneously reading that leaflet. SEAP seems to be a general line of approach, which sums up to assuming that we can induce only as much change as we can really plan, i.e. that we can translate into real action on a given date and in a given place. If I am grasping well the concept, it means that whenever a ‘we will do it somehow’ pokes its head out of our action plan, it indicates we have no proper SEAP. I like the approach, I have experienced its soundness in other areas of life: we can usually achieve more than we think we can, but we need to understand very precisely what is the path to cover, step by step. Here, the coin drops: if we need a good SEAP, it is important to tap into other people’s experience, whence the point of forming networks. Being maybe a bit less ambitious, but more realistic and more in touch with what the local community really can do, is apparently helpful in going 100% green.

That was a leaflet, now I take a scientific paper: “Exploring residents’ willingness to pay for renewable energy supply: Evidences from an Italian case study” by Grilli et al.[3] , an unpublished working paper accessible via the Social Sciences Research Network . The paper explored the attitudes of people living in the Gesso and Vermenagna valleys, towards the prospect of paying higher energy bills as long as those bills will be 100% green. The case study suggests an average acceptance for a 5,1€, or 13% increase in the monthly energy bill. Knowledge about renewable energies seems to be a key factor in shaping those attitudes. Good, so I have another nice, conditional probability: having more than one success in going 100% green locally depends on the local acceptance of higher energy bills, which, in turn, depends on the general awareness of the population involved.

I move forward along that financial path, and I am having a look at a published article, entitled “Is energy efficiency capitalized into home prices? Evidence from three US cities.“, by Walls et al.[4] . Margaret Walls and the team of associated researchers found a positive impact of ‘green certification’ of residential properties upon their market price, with a premium ranging from 2 to 8%. Still, this premium remains strongly local, thus largely idiosyncratic. Staying in this path of thinking, i.e. thinking about money whilst thinking about grand green initiatives, I am having a look at an article by Patrick Hartmann and Vanessa Apaolaza-Ibáñez as for the consumers’ attitude towards the so-called ‘green energy brands’[5]. In this case, the most interesting thing is the methodology, as the results are quite tentative, based on a total of 726 street interviews in six towns and villages in northern Spain. The methodology is based on a set of assumed benefits that an individual can derive from purchasing energy from suppliers certified as 100% green in their process of generation. There is a nice piece of fine reasoning from the part of Patrick Hartmann and Vanessa Apaolaza-Ibáñez. They hypothesise that altruistic environmental concerns and their satisfaction are just one among the many psychological factors affecting the decision of purchasing renewable energy. There is a bunch of egoistic factors, slightly in the lines of Thorstein Veblen’s theory of the leisure class: consuming green energy can provide something described as ‘warm glow’, or personal satisfaction derived from experiencing a subjectively positive impact on the social and natural environment, as well as from the social recognition of that impact that we experience as a feedback from other people. In other words, if a person can expect interactions like ‘Oh! You are buying that 100% green energy? Fantastic! You are such a precious member of the community!’. Let’s face it: each of us would like to be praised like that, from time to time. On the top of that, the purchase may be further affected by the general reputation of the given brand, and by individual attitudes towards experiencing the contact with nature. Whilst tentative, the results of those interviews suggest, quite interestingly that the general attitude towards the suppliers of green energy is strongly influenced by that personal, individual experience of nature in general.

Still following the money, but moving from the small money spent by consumer towards the big money held by banks, I am browsing through an unpublished paper by Karen Wendt, from MODUL University in Vienna[6]. This particular paper is precious, from my point of view, mostly because of the interesting stylized facts it presents. In science, stylized facts are facts that we can express in a graph, but we cannot exactly explain why the graph looks the way it looks. So, Karen Wendt lets me learn, for example, that a large part of the known reserves in fossil fuels, probably between 60 and 80% of them, must stay nicely in the ground if we are to meet the 2°C limit of temperature jump. These reserves are accounted for as assets in the balance sheet of your average Exxon Mobil. If they are to stay where they are, they will have to be kicked the hell out of those balance sheets, and that’s gonna hurt. The same is valid for carbon-intensive infrastructure, like chains of petrol stations or oil-refining plants. If we turn green, all that stuff will have to be written off someone’s equity, and this, once again, is likely to make some people nervous. It shows that if we really want to go green, we really could do with some capitalistic mechanism of transition, which would allow, sadly but realistically, to switch relatively smoothly from a carbon-intensive balance sheet, with the corresponding capital profits financing the corresponding private islands, to a balance sheet based on renewable energies. It warms my heart, those observations from Karen Wendt, as it suggests I am not totally insane when I think about monetary systems specifically oriented on giving market value to green energy.

[1] Rwengabo, S., 2017, Efficiency, Sustainability, and Exit Strategy in the Oil and Gas Sector: Lessons from Ecuador for Uganda, ACODE Policy Research Series No.81, 2017, Kampala, ACODE, ISBN: 978-9970-567-01-0

[2] Mr. Bayes, and Mr Price. “An essay towards solving a problem in the doctrine of chances. by the late rev. mr. bayes, frs communicated by mr. price, in a letter to john canton, amfrs.” Philosophical Transactions (1683-1775) (1763): 370-418

[3] Grilli, G., Balest, J., Garengani, G., Paletto, A., 2015, Exploring residents’ willingness to pay for renewable energy supply: Evidences from an Italian case study, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2669975

[4] Walls, M., Palmer, K., Geranden, T, Xian Bak, 2017, Is energy efficiency capitalized into home prices? Evidence from three US cities, Journal of Environmental Economics and Management vol. 82 (2017), pp. 104-124

[5] Hartmann, P., Apaolaza-Ibáñez, V., 2012, Consumer attitude and purchase intention toward green energy brands: The roles of psychological benefits and environmental concern, Journal of Business Research, vol. 65.9 (2012), pp. 1254-1263

[6] Wendt, K., 2016, Decarbonizing Finance – Recent Developments and the Challenge Ahead, Available at SSRN: https://ssrn.com/abstract=2965677