Can you protect your pocketbook and the planet at the same time?
For the consumer, it has generally been an either/or proposition. Either you pay rock-bottom prices to get the lowest total cost or you pay quite a bit more for eco-friendly choices. In a world where many people barely make ends meet, the long-term health of the environment tended to take a backseat to more immediate concerns.
The times, they've changed
Fortunately, technological advances, high energy prices, and increasing consumer demand for greener options have helped make greener options far more cost-competitive. As a result, the choice is no longer necessarily one or the other.
These days, the answer that's often best for your pocketbook may well be one that's also better for the planet.
Economical environmentalism
Consider compact fluorescent lights (CFLs). The energy-efficient technology has been around since the 1970s, but it never really became mainstream until recently.
The thing that drove the change wasn't some government edict or a massive change of heart among the population. Instead, thanks to a deal between General Electric (NYSE:GE) and Wal-Mart (NYSE:WMT), the dynamics of the business dramatically improved. Wal-Mart's efficient distribution network met up with General Electric's ability to drive the economies of scale into large manufacturing operations. The result of their efforts was a massive reduction in the cost of the bulbs.
As a result, many CFLs are now far cheaper to own and operate over their lifespans than traditional lightbulbs. Now, CFLs can be seen as truly economical choices. The folks who used to have to choose between an efficient lightbulb and food for their family can now get both -- it's in their financial best interests to do so.
Alternatives that really make a difference
Of course, the relatively cheap price of lightbulbs may make such decisions seem minor. But making economical environmental choices works with larger purchases, too -- like air conditioners.
United Technologies' (NYSE:UTX) Carrier air-conditioning website shows that you can buy systems with SEER efficiency ratings between 14 and 21. Based on those SEER ratings, the highest-efficiency ones would use about one-third less electricity than the lowest-efficiency one.
The big question: Which system to buy? Generally speaking, people will likely choose one of three options:
- The lowest purchase price
- The lowest operating cost and environmental impact
- The lowest total cost of ownership
Chances are that the system with the lowest total cost of ownership may fall somewhere in the middle. Budget-conscious consumers can often be easily persuaded to buy the system with the lowest total costs, even if it means shelling out a bit more up front.
Importantly, by buying the lowest total cost system, it frees up more cash to spend on other energy-efficiency related projects.
Utilities often recommend conservation. For instance, Duke Energy (NYSE:DUK) tells its customers, "For each degree cooled below 78, cooling bills can rise by as much as 10%." What that really means is that the more you reduce the general cooling demands of your house, the less you need to run the air conditioner.
The right set of changes could result in even more energy savings than a higher-efficiency air conditioner. Yet without the extra cash you keep by staying away from the highest-efficiency model, you may not have the resources to do things like:
- Plug leaks around doors and windows
- Install better insulation
- Replace windows with higher-efficiency ones
- Plant shade trees
Find the tipping point
Of course, the environmentally friendly choice isn't always the best for your wallet. Consider Honda's (NYSE:HMC) Accords, one a Hybrid, the other a similarly equipped EX-L V6 with a regular engine. If you pay sticker price, the Hybrid will cost you an extra $3,690 up front. But you'll be saving on gas as long as you own your car. What should you do?
As it turns out, you may never save enough on gas to make up for the Hybrid's higher price. Assume you drive 9,000 highway miles and 3,000 city miles a year and pay $3 per gallon for gas. If the EPA figures for gas mileage are correct, you'll still end up more than $1,500 behind after 10 years -- even with cheaper fuel costs.
So while the Hybrid gets better mileage, it's not really worth the higher price tag -- kind of like the CFLs of the 1970s. This is likely a primary reason why Honda is discontinuing the Accord Hybrids. Of course, that doesn't mean there's no market for hybrids. Toyota (NYSE:TM), for instance, has seen some amazing success with its hybrid Prius.
Conserve your resources
While the "pocketbook vs. planet" question no longer always needs an either/or answer, you'll still often need to pay a little bit more up front for a bigger benefit down the road. Even when your pocketbook and the planet are ultimately aligned, to make the right choice, you still have to have the extra cash.
The big news, though, is that thanks to the improving economics of environmentally friendly technologies, these days you can make choices that help both your wallet and the planet. Not only that, but the more financial sense the ecologically smart choices make, the more likely it is that others will adopt them, as well. It's the definition of a win-win-win scenario. You win by keeping more cash in your pocket. Others who follow your lead will do the same. And the more that people adopt financially savvy, environmentally friendly technologies, the better off the planet itself will be.
As long as the up-front costs of eco-friendly products and technologies are higher than the alternatives, you still need to come up with more initial cash to make that purchase. If money's tight but you still want to do well by the planet, my friends Dayana Yochim and Shannon Zimmerman at Motley Fool Green Light can help. By helping you master the financial part of the equation, they can help you free up the cash you need to help truly make the world a cleaner, greener place. Start a free 30-day trial to learn more.
At the time of publication, Fool contributor Chuck Saletta owned shares of General Electric. Wal-Mart is a Motley Fool Inside Value selection and Duke Energy is an Income Investor pick. The Fool has a disclosure policy.
