January 28, 2008
Europe is accountable for a large part of the world’s CO2 emissions (More than 15% stem from the EU-27). Action has to be taken to counter global warming. Thus the EU plans to reduce greenhouse gas emissions by a fifth by 2020.
In order to achieve this aim, the EU Commission proposed in January 2008 an overall binding target of a 20 % share of renewable energy sources in consumption in 2020 and a binding 10 % minimum target for biofuels in transport to be achieved by each EU member state. The Commission promised to monitor very closely the consequences emission trading may have in the future.
To meet the CO2-targets set by the G8-governments the additional investment required in new energy infrastructure and equipment is estimated by the International Energy Agency (IEA) to be in the range of 18 to 50 trillion dollars between 2008 and 2050. This creates a vast business opportunity for the companies with the most advanced technologies – esp. as the investments have to be as efficient as possible. The EU Commission expects the global investment in renewable energy alone to reach a volume of 150 bn EUR by the year 2016.
As production of oil and gas esp. in the North sea is shrinking, the energy bill of Europe will grow in the future – so will the dependence on energy supply from political less stable regions of the world. The only way out of this dilemma is to look for new sources. And the only alternative to hydrocarbons are renewable energies (apart from the disputed nuclear power).
Renewables become more and more competitive to market prices as the oil prices rise and the technology gets more efficient.
The world market for environmental technologies (from energy to waste recycling and water supply) is already much larger than expected. Despite the quite recent start of public discussion, we do not talk of a niche market. The environmental industry represents a volume of 1000 billion EUR – twice the size of the pharmaceuticals industry and not much smaller than automotives (1300 bn EUR) and mechanical engineering (1200 bn EUR).
Europe is – today – excellently positioned in the global market for environmental technologies: market share of waste management/recycling 50 %, power generation 40 %, energy efficiency 35 %, mobility 35 %.
Growth of the environmental industry (5.9 % p.a. 2005-2010) will outpace other sectors (electrical equipment 2.8 %, transport equipment 2.2 %, machinery equipment 2.0 %).
Renewable energies create new jobs in Europe (years 2000-2010 plus 1 million), while other industries reduce employment (electrical equipment minus 450,000, machinery equipment minus 290,000). In Germany for example renewable energies will employ in 2030 almost as many people as the automotive sector; the turnover might reach 1,000 bn EUR in 2030 (Roland Berger projection) almost doubling the expected turnover of the auto sector.
Issues and Challenges
- Staying competitive: The environmental industry is highly fragmented, companies still focus on national levels (e.g. German companies: 67 % are focused nationally, 19 % European, 14 % global).
- The industry starts to consolidate on a global level – so European small and medium sized companies become interesting for international players.
- Europe is leading at addressing the environmental issue. E.g. in Germany for 1,000 USD of GDP only 0.17 TOE (tonnes of oil equivalent) is used, in China it is 0.29 TOE, in Russia 0.51 TOE. Others are catching up though – thus support their home companies. The US increase spending on biofuels and solar power; Australia promotes biofuels – and sets the global agenda discussing energy efficiency (e.g. conventional light bulb vs. new lighting systems). Japan pushes the issue of fuel cell technology.
- In Europe, there is still a huge competition of environment policies on a national and regional level – not to speak of the global level. Companies are discouraged and postpone investments in new technologies.
Possible Questions for the Session
- How can Europe sustain the leadership in renewables/environmental technologies?
- How can we make sure that European companies will benefit from rapidly growing demand for these technologies in emerging markets?
- How to strengthen R&D? How is public spending/support to complement industry spending?
- Should demand be stimulated – and which would be the appropriate means then (e.g. public procurement, building awareness of private consumers/industry)?
- Should we and how could we support European consolidation of the industry – and help to internationalize?
- Governments/EU Commission have to set ambitious targets to achieve the environmental aims – but always with a cost benefit analysis. Which burden can energy intensive industries carry? How can we shape that process to ensure efficiency? Energy saving vs. clean new sources of energy?
- What are the required procedures to bring national environment policies and those of the EU Commission together?
- German Federal Ministry for the Environment: GreenTech made in Germany, 2007
- German Federal Office for the Environment/Roland Berger Strategy Consultants/DIW, Fraunhofer Institut für System- und Innovationsforschung: Wirtschaftsfaktor Umweltschutz, 2007
- European Commission portal on energy issues
- Deutsche Bank Research: Climate Change and Sectors: Some like it hot, 5 July 2007
- IEA/EA: Renewable Energy Technology Deployment – Barriers, Challenges and Opportunities, May 2006