April 2009

Evaluating environmental returns | Environment Matters

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Evaluating environmental returns

Expand the basis on which you evaluate your investment returns

by Stanley Graveline
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One of the few bright spots in what has been a dreary six months for the U.S. economy is the plummeting price of oil. At press time, prices are around $40 per barrel, so it can be easy to forget oil was selling for more than $100 per barrel only a few months ago. Beyond the obvious benefit at the pump, we also should anticipate reduced prices for petroleum-based raw materials and—ultimately—finished goods, freight charges and other expenses.

But there is a downside to this situation: The financial motivation to adopt energy-efficient practices decreases with falling oil prices. The investment return from additional thermal insulation, high-performance heating systems, energy-efficient windows, etc., is different when oil trades at $38 per barrel versus $120 per barrel.

However, you should avoid basing your business decisions solely on the market price of oil. Expanding the basis on which you assess investment returns and payback periods can benefit your business.

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