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Encouraging Green Industry Innovation

Recently, in the New York Times Green Column, Bettina Wassener wrote about the “Plastic Disclosure Project,” which annually surveys industry on their overall plastic use and reports back on consumption trends. The goal of the project is to raise awareness about plastic consumption, create a “plastic footprint” akin to a carbon footprint for business, and hopefully motivate industry to change their consumption habits.

This innovative idea is just one example of the movement towards “Green Industry,” a term which recognizes that in a world of increasing resource scarcity, climate change, pollution, and depletion of natural capital, economic growth must rely on clean and efficient production processes. But what exactly is “Green industry”? More importantly, given the wide variety of creative and green solutions available, how can national governments foster Green Industry to save natural resources? This post gives an overview of national policies and international efforts that can help boost green industry across different sectors.

What is Green Industry?

A single, simple definition of green industry is hard to find, but successfully greened industries do have some defining attributes:

  1. sustainably produced inputs;
  2. minimal use of virgin raw materials;
  3. production processes that minimize the use of water, energy, and materials;
  4. production processes free from harmful toxins;
  5. reuse and recycling of solid waste streams;
  6. substantial reductions in emissions or effluents of harmful greenhouse gases and pollutants; and
  7. products that are built for longevity and durability.1

Market forces drive the evolution of green industry. For example, green consumerism and resource savings can foster the transition from older “brown” technologies to newer “green” ones by creating unique market niches and driving down costs.

Policies to Boost Green Industry

However, in many cases natural market forces (such as economies of scale) may work against such a transition, at least in the short term. For example, solar technology, despite its almost carbon-free impact, has had low market penetration compared to fossil fuel-based electricity because of high upfront capital costs. Because of this, there is a significant role for public policy to speed the transition to green industry. There are four general policy approaches available to promote a transition to green industry: taxation, expenditure, regulatory and institutional.

  1. Taxation based approaches: Taxes or fees can be effective market-based mechanisms for promoting green industry. Taxes can be placed on production inputs, processes, or products themselves to encourage producers and consumers to consider the environmental and social costs that are otherwise not reflected in price tags (economists refer to these as “externalities”). Taxes also have the benefit of redirecting money from environmentally-bad or resource-intensive practices to environmentally-good practices as taxation revenue can be used to support eco-efficiency programs. For example, in 1999, Germany introduced its Ökosteuer or ecotax which shifted the tax burden away from labor costs to tax the consumption of oil and electricity use. The revenue from the tax is used to lower pension contributions and promote renewable energy. The ecotax has led to reduced fuel usage, lower emissions, growth in renewable energy and the creation of new jobs.

  2. Expenditure based approaches: This category includes government procurement standards and investments in education programs, subsidies for clean production research and development, and infrastructure to support new technologies. Government investments can help stimulate development of green Small and Medium Enterprises and R&D to promote more efficient production techniques. Many countries have already started using these tools: The government of Mexico recently implemented changes in its procurement law that require all public agencies to purchase certified wood and furniture products and recycled-content paper; in 2009, the Council of Australian Governments instituted its Green Skills Agreement which seeks to build vocational education and training of individuals and businesses to promote a sustainable and low-carbon economy; and between 2009 and 2013 China, Japan and the Republic of Korea are slated to invest $519 billion in clean technology.

  3. Regulatory based approaches: Direct regulation of industry can take many forms: minimum standards for product composition, fuel usage or energy efficiency; limits on effluents, emissions, and use of toxic materials; mandatory siting and land use constraints; and mandatory cap-and-trade systems for key pollutants. One approach gaining popularity is fuel efficiency standards. According to the International Council on Clean Transportation, eight government entities worldwide—Japan, the European Union (EU), United States, California, Canada, China, Australia and South Korea, China—have proposed, established, or are in the process of revising light-duty vehicle fuel economy or greenhouse gas emission standards. For example, the Obama administration set new fuel efficiency standards for cars and light trucks of 54.5 miles per gallon (mpg) between 2017 and 2025. These standards are projected to cut greenhouse gases by 50% and reduce fuel consumption by 40% from current levels. The EU has stipulated an average CO2 standard of 130 gCO2/km by 2015 and 95gCO2/km by 2020 for cars and SUVs (equivalent to 42 mpg and 57.6 mpg, respectively). China has also proposed a fuel consumption standard of 7 L/100km for cars and SUVs for 2015 (equivalent to 33.6 mpg) (see global vehicle fuel standards here.)

  4. Institutional based approaches: This category includes the creation of new institutions or other arrangements to promote accountability and good corporate governance. This includes industry councils established to disseminate best practices and develop standards, and institutions that support programs to promote certification systems, eco-labeling, audits, indicators, recognition and awards. Examples abound: In the U.S., Washington State’s innovative Industrial Footprint Project developed a set of 25 environmental, 14 economic, and 19 social indicators to guide transformation of the pulp and paper sector ; the EU Ecolabel has become one of the world’s premier eco-label programs, marking consumer products and services from cleaning supplies to tourist accommodations ; and in Japan, the Ministry of Economy, Trade and Industry has sponsored the Eco-Efficiency Awards Program, a program that provides awards designed to promote both environmental issues and green industry.

Encouraging International Innovation and Technology Transfer

New companies wishing to use greener technologies may find it cost-prohibitive to do so, especially in the energy and transport sectors where brown technologies and carbon-intensive energy sources dominate2. International support must foster and incentivize technology transfer and knowledge sharing across developed and developing countries. Continuing to promote larger global or regional networks of knowledge-sharing platforms, such as UNIDO and UNEP’s National Cleaner Production Centres, could further promote cleaner consumption and production. Recently, the EU’s Baltic Sea Region Programme 2007-2013 created a project “Sustainable Production through Innovation in Small and Medium sized Enterprises” that aims to enhance sustainable production processes in SMEs by providing a knowledge-sharing platform, tools and funding needed to test and demonstrate eco-innovations.

The international community can also be effective in creating or supporting a “race to the top” for eco-efficiency. One approach to achieving this is to set internationally-agreed upon sector targets for resource and energy efficiency that encourage industrial competition. Targets can be strengthened over time, taking into account new technological innovations. Japan’s Top-Runner program, for example, sets energy-efficiency standards for appliances and vehicles higher than the best performance value of each product currently on sale in the market. Sector targets can be voluntary and could be specified in an international political document.

These examples showcase only a few examples of the technological innovation and policy ideas that are out there today. Promoting green industry is just a matter of effectively harnessing that energy in the most effective ways. This is something governments will and should continue to look at in the future and at the Rio 2012 Earth Summit.

  1. See, e.g.: Veleva, Vesela and Michael Ellenbecker. 2001. “Indicators of sustainable production: framework and methodology.” Journal of Cleaner Production 9 (2001) 519-549. ↩︎

  2. OECD. 2011. Op cit. note 1. ↩︎

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