Economy and environment

Our current economic system is undermining our prosperity as it is destroying the natural foundations of our commercial activity. This calls for a transformation to a Green Economy which is in line with nature and the environment. The German Environment Agency (UBA) is working towards the implementation of this guiding principle.

Green Economy

The present economic system is destroying our natural resources and thereby eroding the prosperity of future generations. Large-scale logging, depletion of the oceans’ fish stocks and the loss of arable soil are prime examples of this development. The follow-up costs of climate change and loss of biodiversity alone could run up to one quarter of global gross national product by 2050. “Business as usual” in the industrialised countries’ resource-intensive economies and the developing and emerging countries following suit is not a feasible course. This is why a transformation to a Green Economy is necessary which operates within the so-called ecological guard rails and preserves natural resources.

Green Economy is a new model of economic development. It makes a positive connection between ecology and economics and thus increases the well-being of society. The aim is to achieve an economy that is in harmony with nature and the environment. The transformation to a Green Economy requires an overall ecological modernisation of the entire economy and changes in the consumption of resources, emissions reduction, product design and value chains. Funding for innovations in the environment sector plays a key role in this context. UBA is working to establish the Green Economy concept and is drafting proposals on how to design the transformation process.

Transformation to a Green Economy
Within the project “Übergang in eine Green Economy – Notwendige strukturelle Veränderungen und Erfolgsbedingungen für deren tragfähige Umsetzung in Deutschland” [Transformation to a Green Economy - necessary structural change and conditions for success for viable implementation in Germany] led by Projektträger Jülich (PtJ), the German Environment Agency (UBA) commissioned the study „Internationale Bestandsaufnahme des Übergangs in eine Green Economy“ [International evaluation of the transformation to a Green Economy], which has been published in the UBA's “Umwelt, Innovation, Beschäftigung” publication series. The study is the result of the first of five work packages of the project, which PtJ is carrying out with Öko-Institut e.V. PtJ is in charge of overall coordination.

Based on the definition of Green Economy by the Federal Ministry for Environment (BMUB) and UBA, the study undertook to examine its transferability to Germany by taking stock of Green Economy strategies worldwide. In order to learn from previous experience gained and make recommendations for action and concrete steps to be taken in the transformation to a Green Economy in Germany, a broad-based screening process selected 19 countries and regions from an initial group of 34 for analysis. In further steps this number was reduced to eight, selected for their model characteristics, and case studies were done for the following countries/regions: the European Union, Japan, Switzerland, the Netherlands, the Republic of Korea, the United Kingdom, the USA, California and the People’s Republic of China.

The PtJ team then selected and examined in detail five particularly successful and promising measures as best practice examples in respect of their transferability to Germany: the eco-model city project in Japan, the Green Economy Action Plan in Switzerland, Five Year Planning in the Republic of Korea, Sustainable Public Procurement in the United Kingdom, and the Green Funds Scheme in the Netherlands. The aim was to gain a better understanding of the structural and cultural integration of the different approaches to realising a green economy. The results of this first work package have been documented in the above-mentioned internationalen Studie.

The best practice examples have been presented in concise, two-page policy briefs and are available for download individually for the countries Japan, Switzerland, Korea, United Kingdom and Netherlands and as a compilation.

The second work package of the project analysed the underlying systemic impediments to transformation and the possibilities of overcoming them. The team at PtJ then put together five groups of topics based on an in-depth background paper. These topics were discussed and criticised at an expert workshop involving policy-makers, representatives from industry, science and civil society. The workshop talks and results of the analysis will soon be published and available for download as a conference volume on the UBA website.

Green markets of the future

Environmental protection and economic development is not a contradiction of terms but in fact depend on each other. Increasing energy and material efficiency is set to become the decisive factor for international competitiveness in the 21st century. The growth in global population and the economic catching-up processes in the developing and emerging countries will further increase the demand for goods and services. This demand for finite natural resources can only be met in the long term by making "more" with "less" – in other words, by dissociating economic growth from the utilisation of natural resources. As a result, the pressure to use and further develop environmental, efficient technologies is mounting.

Green future markets are a particularly apt example of the economic opportunities of progressive environmental protection. Their key characteristics are energy efficiency, environmentally friendly energy production, sustainable water management and mobility, material efficiency, waste management and recycling. According to some estimates, the global market volume of these main green economies of the future will more than double, namely from €2 trillion in 2011 to €4.4 trillion in 2025. Germany today – thanks in part to its ambitious environmental policy – is among the world's leading suppliers on these markets with a market share of 10 - 23 per cent.

The global race for green future markets has picked up considerable momentum in recent years. Many countries adopted stimulus packages during the financial crisis which included a high share of environmental protection measures: South Korea had a "green" share of 80 per cent, China's was 38 per cent. These programmes were also aimed at catching up in the competition for green future markets. Germany will only be able to retain its market leadership role if it continues to play a pioneering role in environmental protection and provides systematic funding for environmental innovations.

Benefits and costs of environmental protection

Of course environmental protection does not come for free but its benefits are mostly higher than the costs. Investments in integrated environmental technologies and efficiency measures generally lead to many cost savings at operational level, for example through lower consumption of materials and energy or decreased costs for waste disposal. There are also many other advantages of practicing environmental protection at corporate level which are difficult to quantify, some of which include image boosts and the lesser likelihood of accidents. The implementation of environmental and energy management systems is an opportunity to make systematic use of the economic chances of operational environmental protection and to steadily improve corporate environmental performance.

Environmental protection frequently has positive effects on the economy as a whole, for example by lowering material and health damage and other environmental costs. Not least, a high level of environmental quality can be positive for the attractiveness of the business location, allowing a region to attract skilled labour on the basis of its good environmental image.

Environmental protection creates jobs

The employment effects of environmental protection also have a positive effect on the overall economy. The number of people employed in environmental protection has risen steadily in recent years. Nearly two million people were employed in the environmental sector in 2008. Because environmental protection measures often promote labour-intensive sectors and replace imports with domestic value added, the net employment effects of environmental protection are often also positive. Various studies have shown that ambitious climate protection targets can create more jobs, for example due to the expansion of renewable energy or efforts to increase energy efficiency. Measures to increase (raw) material efficiency can also have significant positive employment effects.

Failure to protect the environment generates costs

Environmental pollution causes high costs to society, for example through environment-induced health problems and material damages, crop failure or the costs of climate change. Ambitious environmental policy reduces these costs: the use of renewable energy in 2011 alone prevented €11 billion damage to the environment and health.

In principle environmental costs should be internalised, that is, absorbed by the polluter. This has not satisfactorily been the case up to now. Therefore, polluters do not have enough economic incentives to cut pollution. Furthermore, environmental costs which are not fully absorbed do not reflect the ecological truth. This causes a distortion of competition and inhibits the development and market diffusion of environmentally friendly technologies and products. It is in sectors with a significant environmental impact in particular – energy and transport – where it is crucial that the environmental costs which they create are charged accordingly. The effect would include promotion of the expansion of renewable energies, an increase of energy efficiency and significant momentum given to sustainable mobility.

The German Environment Agency elaborated a methodological convention with which to estimate environmental costs. The convention takes the latest developments in research into account and helps determine the costs of the use of the environment according to uniform and transparent criteria.