THE ESDS AND THE NEED FOR A ‘SMART GROWTH’ STRATEGY Iain Begg European Institute, LSE

WHAT IS THE ESDS? One of several ‘processes’ and strategies –Just the ‘environmental’ dimension of Lisbon –Or the wider framework for the Lisbon strategy… Three core aims of economic governance –Competitiveness, social cohesion & environment –Plus recognition of international obligations In effect a template for 21 st  EU capitalism –Quality of life; intra/inter generational equity –The future of the European social model

THE KNEE-JERK REACTIONS ENVIRONMENTAL CURBS Impose needless costs on business –Excessive restrictions –Doubtful benefits Why should Europe take the lead? Anyway, it’s all a myth!! SOCIAL COHESION Also adds to costs Inhibits labour market flexibility Removes incentives, lowering productivity Growth is, in any case, the best social policy

THE RETREAT OF ARCTIC ICE SEPTEMBER 1979 SEPTEMBER 2005

ENVIRONMENTAL AIMS Approaches to policy The price mechanism –Including use of subsidies and taxes Regulation in all its manifestations –Standards; planning controls; restrictions etc. Volume targets and caps Public relations and exhortation Solutions relying on new technologies Ultimately, about steering investment

BUSINESS ‘EXPOSURE’ Physical – from climate changes etc. Regulatory – respecting obligations –In relation to environmental rules –But also social policy developments Competitive – from shifts in input prices Reputational – including possible litigation The many new business opportunities –: ‘ecomagination’

“these factors may affect regions similarly but industries differently: other factors may affect regions differently, but industries similarly. Even more important, perhaps, firms will be affected differently: climate change will result in important winners and important losers” John Llewellyn, Lehman Bros. Author: The Business of Climate Change (2007)

COSTS …..… OR OPPORTUNITIES? Adaptation - coping with consequences –Manifestly vary with intensity of global warming –And incidence of ageing, immigration etc. Abatement – preventing the problems –Linked to pace of change –Periodicity of investment cycles New energy technologies –Low initial markets, high costs –But associated with growing potential

ALTERNATIVE ENERGY Low-ish costs in next decade –Wind; bi-ethanol; nuclear Potentially falling longer term –Coal with CCS; biomass for heat; photo-voltaic Still distant –Solar thermal; electrolytic hydrogen –The ‘ITER’ Puts short-term emphasis on conservation

WHAT IS “SMART GROWTH”? Much more than a “green” agenda –Integrating economic dimension of SD –And social protection as ‘a productive factor’ Strategic shift in production & consumption –Away from ‘old’ resource intensive means –Towards new, cleaner technologies Win-win solutions to energy challenges Above all, an investment strategy –In technology, and human and physical capital

THE BENEFITS EU leadership can be exploited –The example of new energy sources, e.g. wind –‘Passive’ buildings – highly energy efficient Thus has huge potential for growth & jobs –Consistent with aims of Lisbon strategy …but our rivals could catch & overtake us Japan’s ‘top runner’ programme – cars, appliances Chinese appliance standards; today’s news Even the US is on the move, technology focus Hence urgency

CONCLUDING THOUGHTS Is it all just wishful thinking? Perhaps, but.. –It is about promoting growth, not hampering it –Hence, the case to be made is pro-business Smart growth is therefore about: –Businesses that find novel answers –Coherent public policies that lead the way Through use of standards, regulation etc By stimulating innovative solutions –…dispelling the idea that nothing can change –…dispelling the idea that nothing can change