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Tackling global warming: an opportunity for Europe?

Geothermal power station ©

Europe and the world need to massively scale up investments in projects such as this geothermal plant.

Most stakeholders – political leaders, academics, and business executives – believe that deploying green technologies could help Europe to both tackle climate change and achieve sustainable economic growth. Global competition is intensifying, however, and a dearth of financing will make it difficult to scale up.

Tackling climate change is not just about saving the planet – it can make good business sense, said Commissioner for Climate Action Connie Hedegaard in her keynote address closing the first day of the Brussels Economic Forum.

Quick implementation of wise climate policies could help the EU save money by reducing fossil fuel imports, thereby improving energy security. Moreover, the right policies will keep the EU at the cutting edge of booming green technology industries.

“This is no longer just a niche,” Hedegaard told the Forum. There are already 3.4 million jobs depending directly or indirectly on Europe’s environmental industries, which account for 2.2% of GDP, more than either the pharmaceutical or aerospace industry.

The potential of green growth

Most – but not all – of the experts speaking on the first afternoon of the Forum agreed with Hedegaard, arguing that deploying green technologies could help Europe to both tackle climate change and achieve sustainable economic growth.

Carlo Carraro, President of Ca’ Foscari University of Venice, said that the challenge is both to reduce energy consumption through energy efficiency and to modify the energy mix. Professor Claudia Kemfert of the Hertie School of Governance said that we need infrastructure urgently because the energy system lags 10-20 years.

Professor John Zysman of University of California Berkeley advised that long-term green growth could only come from redefining the energy system, while Professor Michael Hanemann, also of Berkeley, said that green technology will contribute to European growth in the medium and long run but that it is not a remedy for our current economic problems. Professor Dieter Helm of Oxford University doubted that green investment would increase growth, but agreed that it was needed to tackle climate change and its costs.

Business weighs in

The business community was more bullish than the academic community. Answering the question: “Is tackling global warming a business opportunity for Europe?” panellists overwhelmingly saw it as a huge opportunity.

Ivan Hodac, Secretary-General of the European Automobile Manufacturers' Association, observed that European automakers are already technology leaders in sustainable mobility, with average emissions tumbling over the past decade.

Laurent Blanchard, Vice-President for Cisco Systems Europe, said that the convergence of more traditional industries and information is creating huge opportunities. “This is not science fiction, this is reality,” he said.

Jacques Delmoitiez, President of BASF Polyurethanes, claimed that abatement can be achieved in the building sector at relatively low-cost using polyurethane, which is a highly efficient insulation material.

The 2020 targets: from 20% to 30%?

Participants disagreed slightly on the best means to grasp green growth opportunities. Christine Lins, Secretary-General of the European Renewable Energy Council, advocated raising the EU’s 2020 CO2 emissions reduction target to 30%. Delmoitiez and Hodac were both against raising the target, however. Hodac warned that “the EU must not open our market in such a way that production moves to China or Korea.” Jennifer Morgan of the World Resources Institute (WRI) said that ironically American industry sees the 30% target as a threat because it could enable European industry to continue to lead the green technology field by compelling companies to innovate and invest.

Connie Hedegaard warned that keeping the reduction target at only 20% could make it difficult to meet much deeper targets set for 2050. Moreover, according to International Energy Agency figures cited by Hedegaard, every year of dea&layed investment in low-carbon solutions adds USD 500 billion to the cost of action. Hedegaard acknowledged, however, that “whether to move to a 30% target is a political decision for EU leaders to take in due course”.

Connie-Hedegaard © European Commission

The global race is on

While European business and political leaders see potential in green growth, global competition is intensifying. “We are not as alone in the world as we used to believe,” said Hedegaard.

China, for example, is now top of the league for wind power installations, while China and Taiwan are together the biggest photovoltaic cell producers. “If we stand still we will lose our frontrunner status,” said Hedegaard. She mentioned that China is undertaking the world’s largest investment programme valued at USD 230 billion, and the US is investing USD 80 billion in clean energy, while the EU and bigger Member States are investing a relatively paltry EUR 25 billion.

Obstacles to green growth

Financing green growth is not a simple matter, however, according to speakers on the panel about “The financing and structural reforms needed to foster low-carbon growth”. Tightening government budgets and difficulties accessing credit will lead to “major investment challenges”, said Thomas Barrett, a director with the European Investment Bank. There had, he said, been a “significant collapse in the availability
of funding”. Yet according to Barrett, the ability to achieve results would require “full-hearted participation by the private sector”.

Josué Tanaka, a director with the European Bank for Reconstruction and Development, said that scaling up would be the key challenge. He suggested that Europe focus on diversifying and blending sources of finance, on larger projects and on projects that lead to system changes.  

Joëlle Chassard, a manager with the World Bank, said the financing needed to combat climate change would be “massive” – hundreds of billions of euros – of which only a tiny portion – around 5% – was currently available. “There is no silver bullet,” she said. “The mitigation path for China will be very different from the mitigation path for Brazil.”

Speakers agreed that funding climate action faces new challenges. Some renewable solutions, Barrett said, were “inordinately expensive”. While raising finance from banks was likely to be an “uphill struggle” there was some optimism that new, shared financial instruments could be found to keep policy on track and the EU at the forefront of the great green revolution.

Promise undiminished

Geothermal power station ©

Biogas and other green technologies are transforming Europe’s economy.

Hedegaard remained optimistic. While recognising that the economic and financial crisis is the number one priority in Brussels, the Commissioner said there was not necessarily a trade-off between going green and maintaining growth in the traditional sense.

She pointed out that in her native Denmark, decisions made back in the 1970s to diversify away from fossil fuel imports and improve energy efficiency have since led to roughly stable energy consumption without negatively affecting growth.

“This is not a hippie or zero growth or anti-growth agenda,” Hedegaard said. “It’s to provide the basis for continued growth in the future…and sustainable growth is and will continue to be the only kind of growth that the planet can afford.”

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