The BioPhysical Economics Institute is a non-partisan, non-profit, multidisciplinary organization of scientists, economists, investment experts, corporate & project finance analysts and policy professionals, who are working together to bring the natural sciences into economic analysis and decision making.
Specifically, BPEI aims to incorporate the analysis of energy efficiency into assessments of various strategies to reduce our reliance on fossil fuels, while supporting our natural habitats and human flourishing.
Charlie Hall (bio) has been writing papers on biophysical economics (BPE) since 1980.
In the summer of 2020, Hall was approached by several individuals: CEOs from corporations large and small, as well as investment managers and analysts – even an economist. They all had reached the conclusion that the conventional neoclassical economics paradigm is inadequate, to understanding the world and solving investment problems – particularly those related to environmental impacts.
One issue they confronted was the challenge of integrating DCF (Discounted Cash Flow) analysis with ESG (environmental, Social and Governmental) investment criteria. There are no explicit rules or formal logic governing the “E” in ESG, which can lead companies to make ineffective and unsustainable investments – and to wildly divergent third-party ESG ratings – making objective ESG investing impossible. The concept of "Energy Return on Energy Invested" (EROI) pioneered by Hall, and its companion, "Energy Saved on Energy Invested" (ESOI) offers the potential for a practical, general and rigorous set of investment criteria – grounded in the natural sciences.
Hall introduced these individuals to one another which resulted in the formation of the BioPhysical Economics Institute.
BPEI has a simple objective: to bring the natural sciences into economics and decision making. We hope to promote a better understanding of our society and our natural environment, to help businesses and governments to make better decisions, and to facilitate the transition to a truly green (not greenwashed) world.
Hall stands on the shoulders of two pioneering intellects who understood the role of energy in natural and human systems. Howard T. Odum (Environment, Power and Society) established the field of systems ecology, and Vaclav Smil (Energy in World History) revealed the critical role that energy has played in the development of human society. Numerous pathbreaking researchers have followed in these footsteps, including Herman Daly, who pioneered the field of Ecological Economics, Kent Klitgaard who, with Hall, explored the role of Energy and the Wealth of Nations, Reiner Kummel, who co-authored, with Hall and others, The Need to Reintegrate the Natural Sciences With Economics, Carey King who provides a modern perspective on the connection between energy, growth and social outcomes (see The Economic Superorganism) and Robert Ayres, who connected the concepts of Energy, Complexity and Wealth Maximization.
For these and other sources of insight, please visit our Resources section.