Climate economics
Green Premium
Definition
The Green Premium is the additional cost of choosing a clean technology over one that emits more greenhouse gases, a concept popularised by Bill Gates in "How to Avoid a Climate Disaster" and developed by Breakthrough Energy. It can be expressed as an absolute or percentage cost difference — for example, the price gap between an electric vehicle and an equivalent petrol car — and becomes negative (a "green discount") when clean options undercut polluting ones.
References
Supports definition and framing.
Supports definition and framing.
Overview
What it means
The concept converts decarbonisation into a shopping list: for each major emitting activity — electricity, transport, industry, buildings, agriculture — how much more does the clean option cost today? Large premiums flag where innovation, scale, or policy support is most needed; falling premiums mark technologies approaching tipping points.
The IEA's Fatih Birol has called overcoming green premiums essential to reaching climate targets.
How it is used
Analysts use green premiums to prioritise R&D, subsidies, procurement, and carbon pricing; investors use them to judge which clean technologies need patient capital.
Why it matters
It makes the cost of climate action concrete and comparable across sectors — a shared unit for policy, finance, and public debate. **Note:** Confidence Medium: a coined advocacy concept rather than a formalised standard, though widely used.