Additionally, one element should be highlighted, i.e., the dynamics of fuel prices. Most socioeconomic feasibility studies will compare two alternative strategies using expectations of future fossil fuel costs. It is well known that such expectations have a considerable element of uncertainty and are, at the same time, often essential to the outcome of the feasibility study. However, if a substantial part of the countries in the world succeed in the implementation of sustainable energy solutions, one of the important outcomes will be a decrease in the demand for fossil fuels and thereby a reduction in the world market prices. While, on the other hand, if such strategies are not implemented, the demand will expand and lead to increasing world market prices. This places the fossil fuel importing countries in a catch-22 situation. IF all such countries make strategies on the assumption that future fuel prices will be high and, consequently, make large investments in decreasing demands, THEN the consequence will be decreasing world market prices; and
postconducted economic studies will show that the single country actually made a bad decision. However, IF the same countries make strategies assuming low future fuel prices and, consequently, make no investments in
decreasing demands, THEN the consequence will be increasing world market prices, and economic studies will again be able to show that the single country made a bad decision.
As an additional aspect of the catch-22 situation, one may add that the fossil fuel importing part of the world will not be able to make huge investments in decreasing fossil fuel demands without introducing some sort of taxes on fossil fuel and/or subsidies to energy conservation and renewable energy measures. The director of the International Energy Agency [33] has put it this way: The fossil fuel importing countries basically have to choose between two fundamentally different strategies; i.e., either to implement sustainable solutions or not. However, no matter which strategy they choose, the future consumer energy prices will be high. If reductions in demand are not implemented, the prices will be high due to increasing world market prices. However, if reductions in demand are implemented, the prices will be high due to the introduction of the taxes necessary to make investments feasible on the market.
Seen from the view of the fossil fuel importing countries, the main point is that, in both strategies, the energy prices will be high. However, if investments are made in reducing demands, the high prices are caused by taxes; in which case, the money will stay in the country in question. In the other situation, the high prices are caused by high world market prices of imported fuels; in which case, the money will leave the country.
This paper focuses on how to make feasibility studies in a situation with environmental and energy security concerns, in which technological innovation and institutional changes are among the objectives. In such a situation, the feasibility study should include the design of feasible technological alternatives; an evaluation of the social, environmental and economic costs; the innovative potentials of these alternatives; and an analysis of the institutional conditions which influence the implementation of the alternatives. Therefore, the scope and focus of the feasibility studies referred to in this paper are much broader than in the conventional cost-effectiveness and cost-benefit analysis approach.
In the present situation, it becomes essential to be able to include economic growth related to import/export and job creation in the evaluation of different strategies and options. However, the neo-classically based costebenefit analyses typically used are not able to include such important elements. One has to look for other methodologies and theoretical points of departure.