How to make green growth a reality

In a series of posts leading up to the World Economic Forum’s Energy for Economic Growth report launched on Wednesday 7th March 2012, Ditlev Engel, President and Chief Executive Officer, Vestas Wind Systems, Denmark, explains how tapping into market forces can promote renewable energy.

Managing resources for truly sustainable economic growth is rapidly becoming one of this century’s greatest imperatives – and opportunities. Green growth is a matter of making our societies more sustainable while still compatible with a modern way of living. Properly managed and supported, it also results in substantial job-creation opportunities.

If world leaders are serious about generating green growth and the jobs that go with it – as well as ensuring energy security for individual nations and conserving the environment – they need to adopt, with urgency, a broad set of new policies and measures. Simply stated, policy-makers must strike a new balance between incentives and disincentives for investment that indisputably favours green growth.

At the November 2011 G20 Business Summit in Cannes, I had the honour of co-chairing the working group on green growth and presenting its recommendations to an audience that included Mexican President Felipe Calderón. Our group, which included representatives from a diverse cross section of companies such as Alstom, Robert Bosch, CEMEX, Repsol, Samsung and Vestas, made four compelling recommendations that we believe would create a new balance in favour of green growth:

• Allow free trade in environmental goods and services
• Achieve a robust price for carbon
• End fossil fuel subsidies
• Dramatically scale up support for green technology development

Green growth is not some new-age philosophy. Nor is it a hidden agenda for increased regulation in the name of environmental security. Rather, it is a practical proposition to harness the market economy for a transformational growth agenda that explicitly accounts for natural resource capital and corrects for environmental externalities.

Greening and growing the economy are equally important, and we must do both. Greening the economy will provide a sustainable basis for long-term, resource-efficient growth. It has the potential to create many new jobs as well as new business models and opportunities, in much the same way as the transcontinental railroad, the interstate highway system and the Internet created their own economic transformations in the global economy.

Even though we are facing a global economic slowdown and financial crisis, policy-makers should accelerate the implementation of policies that we know will work. The maintenance of a long-term, stable policy framework is essential to encourage industry to make the necessary investments and create urgently needed green economy employment.

Postponing green investments equals postponing the economic recovery. According to the IEA’s World Energy Outlook 2011, “For every [US]$ 1 of investment avoided in the power sector before 2020, an additional [US]$ 4.30 would need to be spent after 2020 to compensate for the increased emissions”. Indeed, delaying action is a false economy. Money “saved” in the next few years by avoiding climate-friendly investments will result in much higher spending later.

But let us be clear: this is a two-way street. Governments need to shift the balance of incentives to favour green investments. And with the right policy frameworks, business will take the risks, make the investments and create the jobs. Notable progress has been made on some fronts in some markets – and we applaud that. We all recognize, however, that we are not going fast enough.

Interestingly, it’s not just business leaders making these recommendations or coming to these conclusions. The public also supports going green. We know that consumers want more renewable energy – a fact confirmed by recent surveys from TNS Gallup and the European Union.

The TNS Gallup survey, which Vestas sponsored, polled 31,000 people in 26 countries. Of those, 90% want more renewable energy; 79% have a favourable view of brands produced with wind energy; and 50% would pay extra for products based on renewable energy.

In a recently released Eurobarometer poll, 89% of Europeans consider climate change a serious problem, with 68% calling it a “very serious problem” – even worse than the current economic crisis.

These data confirm that citizens and voters support going green. This is critically important because to succeed, the green growth agenda must be anchored in the purchasing and investment decisions of individual private and business consumers. Policy-makers should not be afraid of making ambitious investments in renewable energy. Voters will support their actions.