The green invoice

« You can’t manage what you can’t measure ». As Paris gets ready for ten days of snarling traffic and climate diplomacy around the COP21 summit, that old business adage rings true when thinking about pragmatic ways in which we can meaningfully reduce greenhouse emissions.

New technologies, particularly innovations related to the Internet of Things, enable the collection of vast amounts of usage data. By shaping such data into billing based on usage and marginal costs, a powerful tool for environmental change is created:

• Successful cloud operators focus on making their energy intensive infrastructure available on a marginal cost model. By putting in place sophisticated usage-based billing strategies, they create significant incentives for their customers to scale their computing power on an as-needed basis and to shift processing-intensive needs to off-peak hours.
• Transportation is increasingly shifting to a variable or marginal cost model driven by the possibility of coupling smart billing strategies with sensors that track distance and usage. Instead of carrying the fixed costs of car leases and insurance, users resort to multimodal approaches combining smartphone-enabled taxis, car-sharing or leased cars running on metered roads… raising possibilities for vast savings as well as significant environmental impact since they only pay for their transport on an as-needed basis.
• Looking at building costs, where there is huge scope for reduction in energy consumption, connected metering devices are already allowing better rating and allocations of charges. And, if abstract kilowatt-hours aggregated on a monthly invoice were replaced by actual real-time rated costs for devices displayed on your smartphone, consumers, and entrepreneurs would undoubtedly unleash a green revolution that could go far beyond any top-down government-driven policies or regulation.

This new usage-based economy in which smart sensors and sophisticated rating and billing software are coupled to create financial incentives for individual economic agents will have a huge impact on climate change in the coming years, since it allows market forces to fully play their role at a granular level. Hopefully, governments and regulators will factor this opportunity into their plans for significant reduction of greenhouse gas emissions.