Green accounting for greener energy

The first step towards the widespread use of renewable energy sources and preservation of our environment for the people of the future is to adopt the “green accounting” standards that translate socially and environmentally responsible behavior into monetary terms, the only language businesses understand. These standards have the potential of switching on the red light for all pollution-causing power plants, and those depleting the natural capital in any way, be it over-harvesting the forests, or exhausting the underground treasures – coal, oil, natural gas, etc. This paper will show how green accounting can help in changing the focus from the economic welfare to the total societal welfare, acknowledging the fact that human society is an integral part of the natural world. The paper will also briefly present the software developed by the authors that introduce the green accounting principles into the investment appraisal process, aiming at encouraging investments into renewable energy. The tool is also useful as a platform facilitating calibration of economic/financial instruments, like environmental taxes of governmental incentives, that are usually to boost renewable energy sector. The comparative analysis of investment into biofuel-powered combined heat and power production plant using two types of investment valuation standards, one based on conventional cash-flow analysis, the other based on green-accounting standards is detailed in the paper. The analysis is performed as a part of the European Commission Framework Program Project AFTUR, undertaken by the consortium consisting of respectful European Research Establishments in renewable energy area as well as major European biofuel-powered turbine producers. The results show that the wider adoption of green accounting standards would induce the unprecedented growth of the renewable energy sector, because it would make the investment into renewable energy attractive for investors.