Voices 06/01/2014

Relaunching the economy through green growth

The world is changing and it is changing fast. We have all heard the estimates that our population will reach 9 billion by the mid of the century at the latest. In just one generation there will be an additional 2 billion people on the planet, more than the total amount of the global population at the beginning of the 20th Century when it was 1.5 billion. That's more than 200.000 people per day; in 40 weeks the population of Italy; in only nine days the population of my own country, Slovenia.

Europe's economies are built on centuries of resource intensive growth. Throughout their evolution and diversification, our industrial economies have provided great advances in wealth, health and living standards. But at the same time they have scarcely moved beyond the fundamental structure established in the early days of industrialisation, where economic growth relied heavily on the increasingly extensive use of cheap and abundant resources, not just minerals and metals but also natural capital. It also had devastating impacts on the environment, which we are still trying to redress today.

This economic model worked well for as long as the global middle class population numbered a few hundred million. Today that is no longer the case. And by 2030, according to McKinsey's estimates, a further 3 billion people will join the ranks of the middle class, and will naturally aspire to the same living standards we have long enjoyed. Our old resource-intensive growth model is simply no longer sustainable on this scale, and is certainly not compatible with a high level of environmental protection.

Many of the resources our economies depend on, like energy and some raw materials, are already scarce, and others are limited and vulnerable - like clean air and water. Today, the soft laws of economics are coming up against the hard laws of physics as we hit natural resource constraints and planetary boundaries.

As daunting as it seems, the challenge we face of reconciling economic growth with the limits of nature is also a real opportunity. It is an opportunity to rethink our economic model and change path, from one of inevitable destruction to one of sustainable, long-term growth and societal well-being.

For me, the path to worldwide prosperity is clear. It will be determined by the way we manage the planet’s natural resources and the ecosystems that underpin them. It will depend on the extent to which we understand the true value of nature for our economy, and the economic costs associated with their degradation and loss. It requires a shared understanding that tomorrow's growth will depend on making the environment an integral part of our economic policy.

We need a true paradigm shift, away from focusing mainly on protecting the environment for environment's sake, to one that sees the environment and the economy as two sides of the same coin. The new paradigm involves taking into account the limits of the natural world and the resources it provides, and reflecting the costs and benefits of what we do with - and to - nature in our decisions.

And on the other hand, it involves investing in nature to help provide solutions to other challenges we face, such as climate change, disaster prevention, and food security, and even to help pull us out of economic crisis and set us on a different, truly sustainable path to long-term growth. Because nature-based solutions - or ‘green infrastructure’ - are often cheaper to put in place and can offer more benefits than ‘grey’ infrastructures.

This is at the heart of the green economy we aspire to build.

However, like for any economic transition, the transition to a green economy will not be simple.

The economist John Maynard Keynes is attributed as saying that: the difficulty lies not so much in developing new ideas as in escaping from the old ones.

This necessary change in mentality is the biggest challenge we are confronted with. Global resource constraints mean that we have to change the way our economy functions, the way we produce and consume: The way we live.

I am very confident that Italy is ready to rise to the challenge. The recent proposals you have made as part of the 2014 budget law go in this direction, and the presence in this room of so many of Italy’s most eminent personalities clearly shows the extent of your commitment.

I have no doubts in Italy’s ability to take a leading position in pushing the transition forward. On the contrary.

Italy’s natural capital, your cultural heritage, your traditions make you a natural leader in this transition. From north to south, from east to west, you can hardly travel any distance outside major cities without being captured by the beautiful patchwork quilt of the Italian landscape. You cannot walk any distance without being enchanted by the perfumes and aromas that engulf the streets of Italian cities, or without being seduced by the refinement, elegance and delicacy of the creative touch of the Italian artisans.

It is around nature that Italy has built its wealth. This is reflected in your unique culture and tradition, through the rich variety of local food specialties, artisanal products and your growing and expanding eco-industries. Sustainable development has marked Italy’s economic growth in the past. And sustainable development can, and should, mark Italy’s return to growth.

Stimulating the transition to an inclusive green economy can help address the challenges Italy faces, encouraging restructuring and new sources of sustainable growth. But for this to happen, you will need to help drive the structural transformation of the economy across a range of sectors to better reflect environmental and social needs; and you also need to ensure the direction of future growth along those paths.

Past experience suggests that structural change has been driven by waves of innovation, combining technological advancement with collective shifts in perception and behaviour. This transformation is already taking place around your cities.

Sense of initiative, creativity and innovation are no strangers to Italian companies. They are ready to rise to the challenge. Italian companies are already leading the way in Europe with novel ideas in the eco-innovation sectors, such as water, waste, food and drinks, building and construction, and greening businesses. Under the Competitiveness and Innovation Programme, Italian companies were involved in almost one third of all projects relating to Eco-innovation market replication.

But if it is true that enterprises will have to carry the transition to a green economy forward, it is equally true that they cannot be expected to do so without public help. Public authorities and governments need to provide direction, incentives and leadership in order for enterprises to make the right investments in change.

We should work in parallel on three mutually reinforcing directions:

First, the transition requires a long term vision for investments and systemic changes leading to the greening of all, also traditional economic sectors.

Second, we need to support the potential of our green technology industries in Europe, which have a technological and market lead in fast-growing global markets and play the role of true enabler's for greening also all other sectors.

And third, in more short term, we need to stimulate economic growth in the most promising sectors for quick growth. One of these is waste and recycling, but there is also retro-fitting for energy efficiency, which has great potential for kick-starting our economies and creating quality jobs.

Just one example - the mobile phones - we all use them. You can make a wedding ring by extracting 10 tonnes of golden or, or by recycling 10 kilos of mobile phones. Yet, we recycle only 9% of mobile phones in Europe. Over 100 million phones go out of service every year. Extrapolating the results of a UK study we can estimate that by recycling mobile phones in the European Union we could recover 2.4 tonnes of gold, 25 tonnes of silver, nearly one tone of palladium and 900 tonnes of copper every year.

Boosting sustainable, resource-efficient, low-carbon growth will remain one of the European Commission's priorities for the coming years, and we will continue to support this through our policies and funding initiatives.

Why is this shift necessary not only from the environmental but also from the competitiveness point of view? Because Europe is densely populated, locked in resource intensive production and consumption patterns, resource import dependent - we import more than 60% of energy, a lot of raw materials and rare earths – and facing fast growing and more volatile resource prices. Producing the some products by using less energy, less water, fewer raw materials, with fewer impacts on eco-systems, producing the products which can be reused or recycled is essential for our competitiveness. If we are sincere in our wish of keeping a strong industrial base in Europe, it is the only way forward.

Together with my colleagues in the College of Commissioners, I have been working to make natural capital and the efficient use of natural resources part of the central pillar of the EU’s growth strategy, integrating it across all key sectors, from agriculture and fisheries right through to the economic coordination process - the European Semester. We have put in place policies and actions aimed at making the green economy a tangible reality.

Next year I intend to come forward with a package of measures to help take forward the transition to a green economy, take stock of the actions and initiatives we have already introduced, and address existing gaps. We will review the targets in our waste legislation and we will address sustainable food and sustainable buildings.

This work reflects the recommendations of the European Resource Efficiency Platform, where we are honoured to have Minister Orlando as a distinguished member, amongst other ministers, Commissioners, and representatives of business, civil society and academia.

Also next year, together with Commissioner László Andor, we will present a Communication on job creation in the green economy to focus efforts on key economic sectors and emerging skills development. This is where the environmental and employment agendas will come together in search of common solutions.

And together with Commissioner Antonio Tajani, we will present an action plan on green entrepreneurship centred on SMEs. The objective is to help them take advantage of the circular economy, and have better access to financing.

In July next year, Italy will take up the helm of the EU for six months. This will coincide with the start of a new term of the European Parliament, and a new Commission. Through your Presidency, you have a unique opportunity to help shape the agenda for the next five years.

It is my hope that you will place the transition to a green economy at the heart of this agenda.

di Janez Potočnik