31 May 2011   |   News

A new green growth path for Europe

The EU’s new roadmap for low-carbon growth aspires to protect the environment at the same time as spurring the development of new markets and boosting the economy. But can green really equal competitive?

It’s now widely accepted that clean technology can become a significant new sector of the European economy and thus reconcile the two previously conflicting objectives of stimulating economic growth and preserving the environment.

In recognition of this, the EU has set out an ambitious plan to create a low-carbon economy by the middle of the century.  ‘The Roadmap for building a competitive low-carbon Europe by 2050’ aims to drastically reduce European emissions of greenhouse gases whilst simultaneously spurring green economic growth.

For some, proposed actions such as research into hydrogen fuel cells, energy efficiency and renewable energy provide a good starting point. But there is also concern the roadmap is not placing enough emphasis on how these green energy technologies will work and be applied in practice.

“[M]ore work is needed to increase cross-border collaboration between businesses, innovators, the public sector and consumers,” says Annika Ahtonen, Policy Analyst at the European Policy Centre. “Sharing knowledge about different projects and their economic, social and environmental benefits is the basis for achieving a greener economy.”

Importance of incentives

Although many low-carbon technologies already exist, it's still by no means certain that the economics of getting them to market will add up, and for how much longer subsidies will be needed.  In this light, although the promotion of individual technologies is important, some commentators say that more attention should be paid to regulation and stimulus packages.

“[We must] develop the right incentives and disincentives for non-low-carbon technologies and intensive energy sectors to discourage their current dominant position,” says Diana Mangalagiu, Professor of Strategy at Reims Management School and co-author of a major German Environment Ministry report into the European low-carbon economy, “A New Growth Path for Europe- Generating Prosperity and Jobs in the Low-Carbon Economy.”

“Too much emphasis is still given to nuclear fission and biotech and not enough to the role of market opportunities in promoting low-carbon innovations - including feed-in tariffs,” Mangalagiu believes.

Nurturing start-ups

Others argue that the EU also has a lot of work to do, to support clean tech start-ups.  One area in which this might be promoted is within the large-scale EU research projects InnoEnergy and Climate-KIC, set up under the European Institute of Innovation and Technology, to promote the commercialisation of green energy technologies.

“Although it is too early to say how effective these projects [will be], one aspect which seems weak is the support for start-up companies in the renewable energy sector,” says Mangalagiu. “In the InnoEnergy Project, although the German node includes something along these lines - the usual large industry players are key in the project’s other nodes.  I acknowledge they need to be involved . . . but I think their role is over-emphasised,” she adds.

Learning from member states

So, are any individual member states particularly effective in promoting green growth and could the rest of Europe learn from them?  Joan David Tàbara, Senior Researcher at the Institute of Environmental Sciences and Technology, Autonomous University of Barcelona, says there are several examples of favourable regulatory frameworks, including those in Germany and Spain and outside Europe, in California.

He also stresses the importance of learning from counter-examples, such as the way in which the move away from a stable wind promotion policy in Denmark to one that is less favourable for investors – caused the Danish wind power industry to lose momentum.

“The German wind power industry suffered similar investment downturns when additional review processes were added to the Renewable Energy Act, causing significant uncertainty,” he notes.

Similarly, uncertainty over the renewal of tax incentives prompted a dramatic stop-and-go investment pattern in the US wind energy sector, Tàbara says.

Ahtonen argues the common shortcoming of many national efforts to foster green energy is that they are reliant on support mechanisms and government subsidies that are unsustainable in the long-run. “Overall we need to see a shift in Europe, [to] where support mechanisms are replaced by investment,” she says.

“Intelligent use of public funding should be made to leverage-in private investment for renewable energy and clean energy technology,” agrees Mangalagiu.

Many heads are better than one

The European clean technology sector would benefit from greater integration between national projects. Ahtonen suggests the promotion of regional networks and public-private partnerships to share models and ideas that work would be a good place to start. “The best and most attractive examples come with economic, social and environmental benefits,” she says.

Mangalagiu calls for moves to stimulate a combination of integrated projects and an ecosystem of innovation that will allow newcomers to access established markets alongside the incumbents.

One clear message is that technology will not be enough. Policymakers need to pay more attention to the social and organisational changes that are necessary to deliver a low-carbon Europe.

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