THE ESDS AND THE NEED THE ESDS AND THE NEED FOR A ‘SMART GROWTH’ FOR A ‘SMART GROWTH’

STRATEGYSTRATEGY

Iain BeggIain BeggEuropean Institute, LSEEuropean Institute, LSE

WHAT IS THE ESDS?WHAT IS THE ESDS?

One of several ‘processes’ and strategiesOne of several ‘processes’ and strategies– Just the ‘environmental’ dimension of LisbonJust the ‘environmental’ dimension of Lisbon– Or the wider framework for the Lisbon strategy…Or the wider framework for the Lisbon strategy…

Three core aims of economic governanceThree core aims of economic governance– Competitiveness, social cohesion & environmentCompetitiveness, social cohesion & environment– Plus recognition of international obligationsPlus recognition of international obligations

In effect a template for 21In effect a template for 21stst EU capitalism EU capitalism– Quality of life; intra/inter generational equityQuality of life; intra/inter generational equity– The future of the European social modelThe future of the European social model

THE KNEE-JERK REACTIONSTHE KNEE-JERK REACTIONS

ENVIRONMENTAL CURBSENVIRONMENTAL CURBS

Impose needless costs Impose needless costs on businesson business– Excessive restrictionsExcessive restrictions– Doubtful benefitsDoubtful benefits

Why should Europe Why should Europe take the lead?take the lead?

Anyway, it’s all a myth!!Anyway, it’s all a myth!!

SOCIAL COHESIONSOCIAL COHESION

Also adds to costsAlso adds to costs

Inhibits labour market Inhibits labour market flexibilityflexibility

Removes incentives, Removes incentives, lowering productivitylowering productivity

Growth is, in any case, Growth is, in any case, the best social policythe best social policy

THE RETREAT OF ARCTIC ICETHE RETREAT OF ARCTIC ICE

SEPTEMBER 1979 SEPTEMBER 2005

ENVIRONMENTAL AIMSENVIRONMENTAL AIMSApproaches to policyApproaches to policy

The price mechanismThe price mechanism– Including use of subsidies and taxesIncluding use of subsidies and taxes

Regulation in all its manifestationsRegulation in all its manifestations– Standards; planning controls; restrictions etc.Standards; planning controls; restrictions etc.

Volume targets and capsVolume targets and caps

Public relations and exhortationPublic relations and exhortation

Solutions relying on new technologiesSolutions relying on new technologies

Ultimately, about steering investmentUltimately, about steering investment

BUSINESS ‘EXPOSURE’BUSINESS ‘EXPOSURE’

Physical – from climate changes etc.Physical – from climate changes etc.

Regulatory – respecting obligationsRegulatory – respecting obligations– In relation to environmental rulesIn relation to environmental rules– But also social policy developmentsBut also social policy developments

Competitive – from shifts in input pricesCompetitive – from shifts in input prices

Reputational – including possible litigationReputational – including possible litigation

The many new business opportunitiesThe many new business opportunities– : ‘: ‘ecomagination’ecomagination’

“these factors may affect regions similarly but industries differently: other factors may affect regions

differently, but industries similarly. Even more important, perhaps, firms will be affected differently:

climate change will result in important winners and important

losers”

John Llewellyn, Lehman Bros.John Llewellyn, Lehman Bros.Author: Author: The Business of Climate ChangeThe Business of Climate Change (2007) (2007)

COSTS ….COSTS …. .… OR OPPORTUNITIES? .… OR OPPORTUNITIES?

Adaptation - coping with consequencesAdaptation - coping with consequences– Manifestly vary with intensity of global warmingManifestly vary with intensity of global warming– And incidence of ageing, immigration etc.And incidence of ageing, immigration etc.

Abatement – preventing the problemsAbatement – preventing the problems– Linked to pace of changeLinked to pace of change– Periodicity of investment cyclesPeriodicity of investment cycles

New energy technologiesNew energy technologies– Low initial markets, high costsLow initial markets, high costs– But associated with growing potentialBut associated with growing potential

ALTERNATIVE ENERGYALTERNATIVE ENERGY

Low-ish costs in next decadeLow-ish costs in next decade– Wind; bi-ethanol; nuclearWind; bi-ethanol; nuclear

Potentially falling longer termPotentially falling longer term– Coal with CCS; biomass for heat; photo-voltaicCoal with CCS; biomass for heat; photo-voltaic

Still distantStill distant– Solar thermal; electrolytic hydrogenSolar thermal; electrolytic hydrogen– The ‘ITER’The ‘ITER’

Puts short-term emphasis on conservationPuts short-term emphasis on conservation

WHAT IS “SMART GROWTH”?WHAT IS “SMART GROWTH”?

Much more than a “green” agendaMuch more than a “green” agenda– Integrating economic dimension of SDIntegrating economic dimension of SD– And social protection as ‘a productive factor’And social protection as ‘a productive factor’

Strategic shift in production & consumptionStrategic shift in production & consumption– Away from ‘old’ resource intensive meansAway from ‘old’ resource intensive means– Towards new, cleaner technologies Towards new, cleaner technologies

Win-win solutions to energy challengesWin-win solutions to energy challengesAbove all, an investment strategyAbove all, an investment strategy– In technology, and human and physical capital In technology, and human and physical capital

THE BENEFITSTHE BENEFITS

EU leadership can be exploitedEU leadership can be exploited– The example of new energy sources, e.g. windThe example of new energy sources, e.g. wind– ‘‘Passive’ buildings – highly energy efficientPassive’ buildings – highly energy efficient

Thus has huge potential for growth & jobsThus has huge potential for growth & jobs– Consistent with aims of Lisbon strategyConsistent with aims of Lisbon strategy

……but our rivals could catch & overtake us but our rivals could catch & overtake us Japan’s ‘top runner’ programme – cars, appliancesJapan’s ‘top runner’ programme – cars, appliances

Chinese appliance standards; today’s newsChinese appliance standards; today’s news

Even the US is on the move, technology focusEven the US is on the move, technology focus

Hence urgencyHence urgency

CONCLUDING THOUGHTSCONCLUDING THOUGHTS

Is it all just wishful thinking? Perhaps, but..Is it all just wishful thinking? Perhaps, but..– It is about promoting growth, not hampering itIt is about promoting growth, not hampering it– Hence, the case to be made is pro-businessHence, the case to be made is pro-business

Smart growth is therefore about:Smart growth is therefore about:– Businesses that find novel answersBusinesses that find novel answers– Coherent public policies that lead the wayCoherent public policies that lead the way

Through use of standards, regulation etcThrough use of standards, regulation etc

By stimulating innovative solutionsBy stimulating innovative solutions

– ……dispelling the idea that nothing can change dispelling the idea that nothing can change