Eco-innovation and Climate Change

Twenty years after the first Earth Summit and with Rio+20 getting closer, international organizations, governments, scholars and entrepreneurs are convinced that the shift towards a greener economy is the only option now and that it will only happen if concrete actions are taken immediately.

“We are in a very delicate moment of our history and we need to act now”, European Commissioner Janez Potocnik stressed in his video-conference to the participants of the XI Forum on Eco-Innovation in Emerging Economies. “Resources are scarce and the price volatility is at an all-time high”, pointed out Marc Zornes (Engagement Manager at McKinsey & Company), and if we want to achieve the objectives of the Euro 2020 strategy, “we need to break the correlation between carbon usage and GDP growth”, said Ernst Ulrich von Weizsäcker, United Nations chairman of the International Resource Panel.

However, to break the correlation between carbon usage and GDP growth it is necessary to innovate, and to instigate stability is vital. Europe will not be stable until economic growth has been reactivated.

The financial crisis has significantly limited governments’ resources and entrepreneurs now have more difficulties accessing capital than ever before. Besides, the volatility of foreign currencies has increased the risks for investment, and the concentration of trade in China and India has turned these ‘emerging’ economies into a threat for Europe rather than an opportunity.

Even if the European Commission is ready to react – as Timo Makela, Director at the International affairs, LIFE & Eco-innovation directorate, concluded at the end of the conference – “public money will not pay the bills.” But how are entrepreneurs going to undertake the expensive task of innovating in the present circumstances?

Moreover, how are governments going to convince entrepreneurs of the necessity to move towards a greener economy when they cannot demonstrate yet that the transition will serve to create more jobs and more growth?

Ecoinnovation has to be understood as a process of transforming business and politics; not just the economy. Europe has to adopt a clear strategy to appease the uncertainties that prevent entrepreneurs from investing and banks from giving credits to entrepreneurs.

For some entrepreneurs like Katharina Krell, co-manager at Greenovate, only a clear and stable policy framework will help entrepreneurs. She said that “it does not have to be perfect, but it has to be stable, only then can entrepreneurs calculate the risks of an investment.”

Tomi Tura, Innovation Director at Lahti Science and Business Park

It’s about diffusion, not just technology

The solution to climate change should not only come from technology. Technology has served to reduce the carbon footprint of production. Professor Weizsäscker said that, in order to break the correlation carbon-GDP, we should adopt a holistic approach that would imply a 30 percent less CO2 in the energy production; a 65 percent less of energy in wealth; and perhaps 5 percent less wealth.

This means that the current debate goes beyond resources and productivity, and involves producers and consumers equally, as well as emerging economies from all over the world. This means to think more in terms of optimizing processes rather than producing new technologies.

“We need to focus on demand-based solutions rather than on technology,” said Tomi Tura, Innovation Director at Lahti Science and Business Park.

“We have to multiply the successes and replicate what we have done in different places,” explained Frans Verspeek, SWITCH-Asia Network Facility.

The debate on eco-innovation is complicated because it is about how to protect the environment, while also masking a wider debate about the power shift in the international system from the West to the East that hinders the adoption of clear-cut policies for Europe and Asia.

Global Liberalization

Europe and the USA are pushing for further liberalization because they say that it is not possible to innovate if the two most dynamic markets, China and India impose severe tariff and non-tariff barriers such as customs, devaluations, and import prohibitions.

It is the lack of protection of the intellectual property what OECD investors fear the most when entering these new markets. Thaddeus Burns –European Government Relations & Policy, General Electric- said it was necessary to grant the private sector a stable and secure environment that allowed for investments in technology, which is –he said- the only possible way to mitigation of the climate change.

“SMEs need to internationalize to foster economic growth, but there is a lack of venture capitalists because the risks are too high’, Tura explained. One risk that is often overlooked “is the volatility of foreign currencies because it increases the risk of the whole operation”, an entrepreneur noted.

Most participants agreed that further liberalization of the trade flows was necessary, but they requested further protective measures from international organisations for protection of intellectual property and financial stability.

Eco-innovation may be about ecology, but it is more than anything else about business and politics and therefore, looking at the general picture, it is about taking measures to protect OECD economies from the foreseeable internationalization of emerging economies.

More than anything else, it is about Europe…

The participants agreed on the necessity to adopt a more defined and coherent European strategy. But this posed even more problems than the contradictions of liberalization measures. “There are different regulatory frameworks in Europe, different cultures and different approaches to eco-innovation,” Tura asserted.

In the European arena, the eco-innovation debate is not just about ecology and decarbonisation; it is also about Europe and its global role. With China and India rapidly growing, European Member States signed bilateral agreements with the two emerging economies, which raises doubts about the chances to create a coherent European foreign policy.

Many European Member States favour a cluster of companies selected on a national basis to enter the Chinese market, as is the case of the Finnish Environmental Cluster for China (FECC).

Eco-innovation transcends the limits of urban sustainability and climate change. It also has an economic and political dimension that shows the challenges of slowing climate change as well as emerging economies.

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