The financial crisis could transform European Union countries such as Greece into green economies, if leaders can ignore political pressure to deliver quicker “brown” jobs and growth, heads of European environment protection agencies were told in Brussels.
Speculation on the financial markets was largely responsible for plunging the world into recession in 2007-2008. Similarly, short term thinking could derail the transition to a green economy, experts said at the European Network of the Heads of Environment Protection Agencies conference on the green economy on 5 June.
Climate change, a finite planet and a booming global population has forced policymakers to examine how best to become a low-carbon, sustainable society.
Kristín L. Árnadóttir, of the Environment Agency of Iceland, said her country’s banking crisis had created the conditions to use green investment to stimulate economic growth.
Asked if the same could happen in Greece or elsewhere in the Eurozone, she said, “Why not? Do not let a good crisis go to waste”.
Pressures like climate change meant “brown” investments were not viable over the long term, said Professor Paul Ekins. He cited United Nations Environment Programme modelling that showed green growth would overtake brown growth by 2017 if investments were made in natural capital.
“This is why the green economy is not only desirable in the medium term but imperative in the long-term,” said Ekins, the director of University College London Institute for Sustainable Resources. Green investments were long term investments, which meant the immediate rewards were less but lasting, he said.
One would not necessarily look to the green economy for short term jobs and growth results, said Ekins, but the transition would bring macro-economic benefits if well-handled.
Commission under pressure
But short term results were exactly what EU leaders were under pressure to deliver, said Karl Falkenberg, the European Commission’s top civil servant for the environment.
The director-general of the Commission’s DG Environment said that was the reason for the false perception that the executive viewed the environmental issues as a cost to business.
“We need to be better in explaining there’s a lot more opportunity than cost,” he said.
The financial crisis had shown that while speculation could provide short term rewards, there was a time when it bit back. The same was true for some brown investments, which brought unsustainable results, said Falkenberg.
Gwenole Cozigou is director for industrial transformation and advanced value chains in the Commission’s DG Grow, the department for industry, entrepreneurship and SMEs.
The crisis had highlighted the importance of manufacturing, he said, with each manufacturing job adding three to four additional jobs in the economy.
DG Grow and Environment were working together on a new Circular Economy package of waste, incineration, and recycling laws, which would bring together the economy and the environment.
A previous version of the package was axed by Commission First Vice-President Frans Timmermans. It would be replaced with a more ambitious proposal by the end of the year, the “Better Regulation” chief said last year.
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Falkenberg said the economy and the environment were like two chambers in a heart. “If one chamber is bigger than the other, you’re on your way to hospital,” he said.
Executive Director of the European Environment Agency Hans Bruyninckx said, “We need the courage to say regardless of the political pressures that go clearly in the direction of jobs and growth, that the green economy is something that needs attention in and of itself.”
But in order for the shift to the green economy to happen, it was necessary to harness the banking sector, said Marianne Fay, chief economist at the World Bank.
That could help investors compensate for the greater risk posed by green investments, which also tended to be more capital intensive, she said.
Financial institutions, including the Bank of England and China’s central bank, were increasingly considering factors such as carbon risk exposure, she said.
“I’ve been amazed by the fact there are some very serious banking and finance people who are really recognising that this is really an issue for financial and banking regulations,” said Fay.
There was a long way to go, she said, but that change had huge potential to drive the transition.
Professor Ekins said it was vital that leaders were consistent on policy to give investors the certainty they needed to back green projects.
Policymakers had to create the conditions for new markets, said Fokko Wientjes, vice-president of multinational sciences company Royal DSM. He agreed financial institutions could speed up the move to a green economy.
He said, “The financial sector has seen the risks of climate change, what if it starts to see the opportunities?”