21
Apr

The green hope

Written on April 21, 2009 by Dirk Hopfl in Go for IE

1726IE Focus, April 2009 | By Javier Carillo, Professor at IE Business School
Green stands for hope as Governments worldwide start to consider new economic development models based on energy saving and clean technologies.
In recent decades the connection between the market economy and environmental sustainability has passed through different stages. The environment appeared on the international political agenda with the publication of the Brundtland report in 1987 and has gained in importance in various international and national legislations since then. Many companies still see this mandatory inclusion of a social objective in its private objectives as a burden on their results accounts. At the beginning of the 1990s, the enterprises that belonged to the World Business Council for Sustainable Development (WBCSD) established the paradigm of eco-efficiency and started to see the private benefits of reducing environmental costs. More recently, two new dimensions have been added to the market-environment connection: the reduction of energy dependence and the creation of environmental business and employment.

Here, I will focus on the latter. Indeed, the so-called eco-industry is becoming the green hope for many governments. Indeed, there are indicators that point to optimism in the clean technologies sector. According to a recent report published by the Cleantech Group, investments in risk capital totalled US$8400 million in this sector in 2008 for the economies of North America, Europe, China and India. This result is a record in the sector and 38% up on the figure for 2007. It was tarnished only slightly in the last quarter of 2008, which was 4% down on the same quarter for the previous year, albeit on a notably worse economic scenario. The most outstanding technologies are solar (40%), biofuels (11%), transport (9.5%) and wind energy (6.0%). If world investment in renewable energies reaches the figure of US$630,000 million between now and the year 2030, the International Labour Organisation estimates that the sector could create twenty million new jobs.This has been taken aboard by the Obama administration, which intends to create 5 million jobs with its New Energy for America plan, strategically investing US$150,000 million over the next 10 years. This investment will focus basically on: (1) the commercialisation of hybrid vehicles made in USA, with the target of 1 million on the road by 2015; (2) the promotion and development of renewable energies, which should represent 10% of its electricity generation by 2010 and 25% by 2025; (3) the promotion of energy efficiency; (4) the development of low-emission coal plants; (5) progress in the new generation of biofuels; and (5) the establishment of a new digital electricity grid. Beyond its potential contribution to reactivating the economy and creating employment, in this other aforementioned area of the reduction of energy dependence, Obama’s ‘green plan’ claims that, thanks to this investment, the USA could save a volume of crude oil over the next decade equivalent to the amount currently imported from the Middle East and Venezuela.

Other governments have also promoted this type of plan, including Spain. The reasons are clear: the great significance of fossil fuels in the Spanish economy, together with an energy intensity that is 20% higher than the EU average would have made us €17,000 million poorer last year, i.e. 1.55% of the GDP. Accordingly, the aim of the Energy Efficiency and Savings Activation Plan 2008-2011, which has a budget of €245 million, is to generate a total saving of between 43 and 44 million barrels of crude in the three-year period.

Furthermore, public investment in clean technologies could represent a good opportunity for fostering economic growth in sectors with greater value-added and for improving the outlook of the less productive sectors that have suffered a greater loss of employment. Accordingly, the Movele Project, developed by the Spanish Ministry of Industry, has been designed to determine the viability of implanting the electric car in Spain, involving private businesses from the car industry, electricity, insurance and financial sectors. With an initial budget of €10 million, the aim of the project is to introduce 2,000 of these vehicles in urban areas and set up 500 recharging points between 2009 and 2010. This is part of the more complex objective (which is also more ambitious than the United States plan) of having 1 million hybrid and electric cars, most of which would be made in Spain, on Spanish roads by 2014. In the construction sector, the State Housing and Refurbishment Plan, which has been designed to improve the energy efficiency of the homes that have already been built and foster the use of renewable energies, plans to refurbish 500,000 homes by 2012 and has been allocated an initial budget of €800 million. According to the Ministry of Housing’s calculations, the refurbishment of buildings and houses for energy purposes could create 75,000 jobs per year over the next four years.

Let us trust that this green hope comes up trumps, as it will be better for all of us in many ways.

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