What are the practical applications of a cost-benefit analysis in the energy sector?

The Product Management Toolkit can be applied in the context of climate investments by using its tools and frameworks to analyze and manage the investments. For instance, a price sensitivity matrix can be used to understand how changes in the price of carbon credits or renewable energy technologies would affect demand and investment returns. Defining the total addressable market can help identify the potential scale of climate investments. Cost-benefit analysis, a common tool in product management, can be used to evaluate the economic viability of different climate investments, considering both their costs and potential benefits in terms of carbon reduction.

One example of a cost-benefit analysis being used for climate investment decisions is the case of the International Energy Agency (IEA). The IEA projected that a total of $5 trillion annually must be spent in energy investments to meet the net-zero targets by 2050 set by over 110 countries. This projection was based on a cost-benefit analysis considering the potential economic and environmental impacts of not meeting these targets. The analysis helped governments understand how much they need to invest to reach their country's pledge.