Technology and Policy for Sustainable Development

Report, 2002

Executive Summary 1. The mandate given by the European Council (Chapter 1). At the European Council in Göteborg in June 2001 a strategy for sustainable development was agreed, completing the Union’s political commitment to economic and social renewal by adding a third, environmental dimension to the Lisbon strategy and establishing a new approach to policy making. The European Council stated that clear and stable objectives for sustainable development will present significant economic opportunities. This “has the potential to unleash a new wave of technological innovation and investment, generating growth and employment”. The European Council invited industry to take part in the development and wider use of new environmental technologies in sectors such as energy and transport and in this way decouple economic growth from pressure on natural resources. The Commission committed itself to present to the Spring European Council 2002 a report assessing how environment technology can promote growth and employment. This report, assessing how technology for sustainable development can promote growth and employment, is one contribution to the follow up by the Commission of the mandate from Göteborg European Council. 2. The role of technology for investment, growth and employment (Chapter 2). The report takes the broad view of Agenda 21 on technology as a starting point. The integration of environment policy into a strategy for sustainable development and the broadening of the measures from regulations to more of market based instruments, leads by necessity to a situation where more and more of the technologies will be regarded as mainstream technologies, rather than regulation-driven eco-technologies. As a consequence of this choice of a broad definition of technology the report has the title “Technology and Policy for Sustainable Development”. The report confirms and elaborates on the main message from the Göteborg European Council that new technology offers a strong growth dividend, through investment in which new technologies are embedded. To attain a GDP growth rate of 3 per cent per year – in line with the Lisbon strategy - a rate of investment growth of about 4 to 6 per cent over several years seems necessary, which represents a significant acceleration from the 2 per cent average over the 1990s in the euro area. A higher rate of investment will create room for a faster replacement of old technologies. In addition, a strategy for sustainable development – including policies “to get prices right” – will make the introduction of new technologies more profitable and contribute to stimulate investment. Consequently, the EU strategy for sustainable development can both build on the macroeconomic efforts to stimulate investment and give a strong contribution to such an investment strategy. 3. The potential of new technologies for sustainable development (Chapter 3). Technology is a double-edged sword. It is both a cause of many environmental problems and a key to solving them. It is a matter of fact that the technologies of the past, still dominating in transport, energy, industry and agriculture, are undermining our basic life supporting systems – clean water, fresh air and fertile soil. However, in each of these sectors there are new technologies available or emerging, that may, if widely used, essentially solve the 4 environmental problems. Thus, new technologies have the potential to contribute to a decoupling of economic growth from pressure on natural resources. The fact is that we face a choice between technological change at historically unprecedented rates or a change in atmospheric composition unlike any experienced since the dawn of humanity. During the 1990s we have seen a substantial diffusion of renewable energy and transport technologies and further progress in industry and agriculture technology, not least biotechnology. The most promising for immediate investment is energy saving technologies in housing and the tertiary sector. A systematic introduction of best available technology could reduce the use of energy with 20-50 per cent. New technologies for waste management offers a great potential; the most recent investment in this sector shows a utilisation of more than 90 per cent of the energy content of waste. Even more fundamental are new technologies for “up-stream” resource management in industry, offering strong synergies for productivity in production, quality in goods and services and efficiency in the use of natural resources. In this way a dematerialisation can be brought about in a larger scale. In agriculture organic farming is increasing with 20 per cent a year, in spite of subsidies to traditional, nonsustainable farming methods. Yet, in other cases the growth is not self-sustained. There are still significant obstacles to be overcome to reach the stage where the diffusion of renewable energy technologies is independent of government interventions and where these technologies have made a major inroad into the energy market. The extent to which more efficient technologies will be adopted by the market depends largely on the relative future price relations between different sources of energy, government policies to benchmark or to set standards for eco efficiency and voluntary commitments by industries. It is also of vital importance to consider consumer’s preferences for eco efficient products as well as consumer protection. 4. EU policies of importance for new technology for sustainability (Chapter 4). The European policy initiatives in the main policy areas are discussed in Chapter 4. Such policies can – if forcefully implemented by the Member States – have a strong effect on the demand for new technology in general and could give a strong push for investment. Of fundamental importance is the recommendation in the Broad Economic Policy Guidelines on a gradual but steady and credible change in the level and structure of tax rates until external costs are fully reflected in prices, to cope with the most fundamental structural problem in all developed countries, the unsustainable patters of production and consumption. There is a substantial scope for a rebalancing of prices, particularly on energy markets in favour of renewable energy sources and technologies by using both taxes and other market instruments. The implementation of the European Climate Change Programme (ECCP) and the directive establishing an EU framework for emissions trading will act as a strong driving force towards more sustainable price relations. The setting of good environment standards to prevent the worst cases and measures to stimulate best practice, Integrated Product Policy (IPP), for the whole EU area will have a similar stimulating effect on investment in new technology. The European Single Market is the biggest market in the world for technology, and will become even more important through enlargement. The practices developed in this market will become global standards for all enterprises that wish to compete on this market. Thus, the integration of sustainable development in all policies, not least in research and development, can make the EU the 5 leading global actor in the renewal of products and processes, unleashing a new wave of technological innovation and investment, generating growth and employment. This makes the Member States’ sustainable development strategies, and a decisive implementation of these strategies, a matter of fundamental importance for growth and employment in the whole Community. 5. Enlargement and technology for sustainable development (Chapter 5). The review of the situation in the candidate countries highlights the role of technology and investment as key to the EU strategy for sustainable development. Enlargement of the EU will create strong incentives for the candidate countries to speed up the modernisation process, phasing out old investment and technologies from the command and control period and phasing in the most recent technologies. The energy sector is the most prominent example, where the candidate countries need to increase their capacity substantially and, at the same time, replace old outdated plants with new eco-efficient technologies. 6. Policy conclusions (Chapter 6) The integration of environment in the Lisbon strategy and the emphasis on new technology for sustainable development, agreed by the Göteborg European Council, will make the policies of each of the three pillars of the strategy mutually supportive: • To attain a GDP growth rate of 3 per cent a year and to bring about a decoupling of economic growth from pressure on natural resources, a rate of investment growth of about 4 to 6 per cent seems necessary, increasing the investment share of GDP from around 20 per cent to 24-25 per cent. • This higher rate of investment should be utilised to phase out old technology and phase in new technology, contributing to productivity, quality and eco-efficiency for health, prosperity and environment; to achieve these objective a forceful implementation of a strategy to “get prices right” is necessary to make the value of natural resources and eco-systems visible to the agents in the economy • Economic growth and investment should be utilised to create more and better jobs and be made sustainable by policies, that facilitate participation in working life (see Guidelines for Member States Employment Policy 2002); in this way the EU should reach the employment rate of 70 per cent, agreed in the Lisbon strategy, making Member States’ social protection systems, in particular their pension systems, more sustainable.