I wrote this post after reading a short tweet by Ben Cubby, Environment Editor at the Sydney Morning Herald, who tweeted earlier today:

Should burning woodchips be classed as #renewable energy? Oakeshott and Windsor think maybe it should. bit.ly/zwipL4 #climate

I read this while walking to the office and pondered the question of whether or not wood chips should be classified as renewable. My first reaction was that this is surely a question scientists can answer for us, perhaps using life cycle analysis or some other comprehensive study. Then I began to think about the nature of what it means to be renewable. Given a long enough time frame, everything in the Universe will be re-used in some way eventually. Everything is technically renewable. Of course, bringing things back to a more human scale makes things more complicated. The word renewable ends up meaning good, while non-renewable means bad. I think this way of looking at things is too narrow to be useful. Here’s where economics comes in.

Any first year economics student will be familiar with the concept of ‘opportunity cost’. It is essentially what you forgo to undertake a particular activity. A common example used by lecturers is the “you could be working and earning $17.50 per hour, or you could be in my lecture”. I personally thought that the majority of my lectures and lecturers where worth a lot more than $17.50. As for others, perhaps I should have been stacking shelves at Woolworths instead. Anyway, back to my point.

To assess whether or not something has merit environmentally, I think it’s better to think in terms of opportunity cost than renewable/non-renewable. In the case of woodchips, this means thinking about what we forego by chipping and burning the chips in question. If the woodchips are from native forest logging, the it’s my opinion that the loss of habitat and associated biodiversity impacts probably outweigh the benefits of burning. If the woodchips come from waste products such as green or construction waste then the opportunity cost of burning these for energy is much lower and so it makes sense. Debates about the renewability of otherwise of a resource can miss the point entirely.

Based on this, the lowest opportunity cost form of power is probably solar, preferably floating in orbit around the earth. Anyway, that’s a topic for a scientist, not an economist.