Report from the Commission - Environmental technology for sustainable development
Date: 2002-03-13
Institutions: European Commission
Subjects: EU environmental policy, clean technology, new technology, soft technology, sustainable development

EN

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.03.2002
COM(2002) 122 final

REPORT FROM THE COMMISSION

Environmental technology for sustainable development

EXECUTIVE SUMMARY

At the European Council in Lisbon in March 2000, the European Union set itself the objective
of becoming “the most competitive and dynamic knowledge-based economy in the world”. At
the Göteborg European Council in June 2001, a strategy for sustainable development was
agreed, by adding an environmental dimension to the Lisbon Strategy. Environmental
technologies are an important bridge between the Lisbon strategy and sustainable
development, having the potential to contribute to growth while at the same time improving
the environment and protecting natural resources.

New and innovative environmental technologies can add to economic growth in a number of
ways. Provided they reduce the costs of environmental protection, they allow us to get more
environmental protection for less money, or to meet current standards at a lower cost. This
frees up resources for use elsewhere in the economy. They also help to decouple
environmental pollution and resource use from economic growth, allowing our economies
more scope to grow in the long run while still remaining within our environment’s limits. This
is central to sustainable development.

Finally, an innovative environmental technology sector can help underpin growth if it is
capable of tapping into rapidly growing export markets. Trade in advanced technologies can
be good both for the EU, as well as other countries that need such technology to help them
tackle their own environmental problems. By developing better and more cost-effective
face the same
technologies we open up a wider
environmental constraints that we do

range of options to countries that

It is clear that when we talk about environmental technologies we mean far more than ‘end-
technologies include ‘integrated’
of-pipe’ devices to clean up pollution. Environmental
technologies that prevent pollutants being generated during the production process, as well as
new materials, energy and resource-efficient production processes, environmental know-how,
and new ways of working. In short, we should take a broad view of environmental
technologies, as from a policy perspective our concern should be the use and potential of
environmental technologies throughout the economic system

The recognition in the Lisbon Strategy that we need to renew our capital stock to improve our
economic performance therefore gives us an opportunity to invest in an economy that is both
more competitive and capable of supporting sustainable development. In particular, the
enlargement of the EU and the investments needed to comply with the environmental acquis
provide a great opportunity for the EU15 and the Candidate Countries to increase their uptake
of environmental technologies and contribute to sustainable development.

Environmental technologies are already a growing industry. Rising demand for a better
environment has led to an expanding supply of environmentally friendly techniques, products
and services in both the industrialised and the developing countries. However, we do not have
data that captures the whole range of innovative technologies in use. The data we have only
captures a narrow range of environmental technologies, and includes only those that are
driven purely by environmental protection requirements. Nevertheless, the data we do have
show this is a diverse and dynamic sector that is well placed to perform in this growing
market

Community policies already promote new environmental technologies in a variety of ways.
But much of the potential of environmental technologies is unrealised because of market and
institutional barriers that hinder their use. In particular, market prices often do not reflect the

2

full value of environmental resources, which means that markets do not provide the right
signals to investors. This leads to systematic under-investment in innovative technologies by
both firms and households.

Removing market obstacles and “getting prices right” by internalising environmental costs in
market prices is therefore crucial
the potential of environmental
technologies to the full, and to provide incentives for further research and development in this
field. Other institutional obstacles such as information gaps and capital market constraints
also matter. Innovative activity also depends greatly on how regulatory and other policy
instruments are designed, putting a premium on improving the quality of regulation and
governance

if we are to exploit

By developing and bringing to the market new environmental technologies, the EU can
contribute to sustainable growth both domestically and worldwide. The Commission therefore
intends to develop an Action Plan to address the barriers that hinder the wider diffusion of
environmental technologies and to promote their development and use.

3

REPORT FROM THE COMMISSION

Environmental technology for sustainable development

1.

INTRODUCTION

When meeting in Stockholm in March 2001, the European Council announced that it would
review the contribution that the environment technology sector can make to promoting
growth and employment, in the spring of 2002. The European Council in Göteborg1 in June
2001 noted that the Commission would prepare a report on this issue. This Communication is
a response to this commitment, setting the scene for the development of a future Action Plan.

This paper has to be seen in the context of the strategic goals set for the EU at the recent
Lisbon and Göteborg European Councils. At the European Council meeting in Lisbon in
March 2000, the Union set itself the goal of becoming “the most competitive and dynamic
knowledge-based economy in the world, capable of sustained economic growth with more and
better jobs and greater social cohesion”. At the Göteborg European Council in June 2001, a
strategy for sustainable development was agreed that adds an environmental dimension to the
Lisbon Strategy.

The EU sustainable development strategy is based on the principle that economic growth,
environmental protection and social inclusion should go hand in hand. In this respect,
environmental technologies that lower the costs of environmental protection can play a dual
role. On the one hand they help meet us increased demands for a cleaner environment by
reducing the environmental impact of economic growth, while on the other they reduce any
impact of higher environmental standards on GDP growth itself. In other words, they play an
important role in de-coupling environmental impacts from economic growth.

There are strong and natural links between the Lisbon Strategy for a competitive, dynamic
and inclusive Europe and the Göteborg strategy for a sustainable Europe. Fostering
technological progress and renewing the EU’s capital stock are major aims of the Lisbon
Strategy.
to increase employment and secure financial sustainability, while
providing the leeway for more inclusive economic and social policies, the Lisbon strategy
sees the need for policies that could raise the growth rate of the EU economy to around 3%.
To do this, the rate of investment growth in research, development and technology should
substantially accelerate.

In order

Ensuring that future investment is environmentally friendly will be critical. European
firms will need to invest more in research and development, and move towards the concept of
a knowledge-based industry. In particular, a substantial increase in both public and private
research and development2 will be an important signal of the underlying desire for a
sustainable future. Only such a change in attitude can shift European industry to a knowledge-

1

2

The Gothenburg European Council Conclusions state that "the Commission will present a report
assessing how environment technology can promote growth and employment"
« The European Council should endorse action to strengthen the European area of research and
innovation by setting a target of 3% of GDP for the overall level of public and private spending on
research and development by the end of the decade. Within that total, the amount funded by business
should rise to around two thirds, against 55% today » Communication from the Commission to the
Spring European Council in Barcelona “The Lisbon strategy – making change happen”.

4

based approach, where production systems and consumption models are compatible with
sustainable development.

The Lisbon Strategy is also about removing market barriers and establishing the right
thrust -
incentives for a new wave of technological progress. Therefore,
including items such as the completion of the internal market in the financial sector, and the
simplification of regulatory frameworks - will also help the emergence of innovative solutions
and forward-looking firms in the field of environmental technologies. However, the problems
of under-investment and slow dissemination are more acute for environment technologies. In
addition to traditional factors such as a lack of venture capital, risk aversion or red tape,
investment in environmental technologies is limited because market prices do not adequately
reward good environmental performance.

its overall

technology used in the paper.

in Section 2, of the concept of
This Communication starts with a short presentation,
environmental
for
environmental technology are provided on the basis of observed trends in a narrow part of this
sector, the European eco-industry (Section 3). Section 4 provides a preliminary description of
the global environmental technology market and the position of the European industry in this
market. An overview of possible developments in the field of environmental technologies is
provided in Section 5, while Section 6 describes the market barriers to their development and
use, as well as some of the current actions and instruments being used to overcome these
barriers. Section 7 concludes the report by listing some directions for future work.

the general market

Indications of

2.

ENVIRONMENTAL TECHNOLOGIES: CONCEPTS AND DEFINITIONS

Environmental technologies include both integrated technologies that prevent pollutants being
generated during the production process, and end-of-pipe technologies that reduce the release
into the environment of any pollutants that are produced. They can also include new
materials, energy and resource-efficient production processes as well as environmental know-
how and new ways of working. This report takes a broad view of environmental
technology, to include all technologies whose use is less environmentally harmful than
relevant alternatives.

This concept clearly need not be limited to a small number of core activities. It could include
intermediate products, machinery, equipment and vehicles used for environmental protection,
and the environmental activity of all businesses. It also recognises that in a knowledge-based
economy, technology is increasingly about our skills and know-how rather than the simple
presence of industrial processes or high capital spending per employee. Hence, environmental
technology includes both low and high-tech applications. Boosting the degree of technology
inherent in low-tech applications is just as important as boosting it in applications that are
already high-tech.

Indeed, environmental technologies are so common and diverse in our economy that defining
them precisely is extremely difficult. Because any technology that improves on existing
the
environmental performance is an environmental technology in the sense used here,
definition shifts over time. However, this statistical issue is of secondary importance. From a
policy perspective our focus should be on the use and potential of environmental
technologies throughout the whole economic system. Every investment includes a choice
between more or less environmental technologies. This is true even for technologies whose

5

main driver is not the environment. Today, total investment in all technology represents about
20% of GDP3. This is the “market” for environmental technology this report is looking at.

Of course, some environmental technologies are driven by environmental considerations,
including legislation, rather than by profitability. For such technologies we have data based
on the OECD/Eurostat definition of the ‘eco-industries’. However, it should be stressed that
the activity of the eco-industry defined in this way is mainly a response to the environmental
impact of economic activity, and increasing the sector’s size should not be seen as a policy
objective. In the same way, while an efficient health system is a necessary tool to protect
health, it is a means, not an end in itself. Indeed, in the long term a small ‘eco-industry’,
defined in this narrow way, would be a sign that society was organising production and
consumption in a sustainable way, and producing less pollution that needed cleaning up.

Other environmental technologies are ‘win-win solutions’ that allow for both an increase in
environmental performance while improving economic performance at the same time. For
example, some uses of information technology can allow firms to increase their profitability
by improving their use of resources - this may lead to environmental benefits, but was not the
main reason for their actions. Technologies such as these can decouple environmental
pollution from economic growth, allowing our economies to grow faster while remaining
within our environment’s limits. By definition, win-win technologies are good for firms'
profitability and therefore for growth. However, we cannot easily predict the scope for the
future development of such technologies.

For these reasons, it is extremely difficult to assess the potential contribution to growth of
environmental technologies as a whole.

Unfortunately we do not have data that provides a picture of the use of environmental
technology in the broadest sense. We do have data on the narrower ‘eco-industries’. While
this data cannot be used to derive quantitative estimates of the potential for environmental
technologies to add to economic growth, it is still worth examining this narrow segment in
some detail, as it paints a picture of an industry that is diverse and dynamic. These data also
provide a rough indication of market trends and potential
in the broader field of
environmental technologies. But it is important to repeat that the scope of this report is not
confined to environmental technologies that are captured in the statistical definition of the
eco-industry.

3.

THE EUROPEAN ECO-INDUSTRY

A measure of environmental technology, narrowly defined, is possible using the standard
OECD/Eurostat definition4 of the eco-industries as “all activities which produce goods and
services to measure, prevent, limit, minimise or correct environmental damage to water, air
and soil, as well as problems related to waste, noise and ecosystems”.

This definition includes three categories of activities: 1) pollution management of both a
preventive or remediative nature (such as reducing emissions, reducing environmental risk or
clearing up environmental damage); 2) cleaner (integrated) technologies and products

3

4

European Commission, 2001
OECD & Eurostat, 1999

6

which are any activities that continuously improve, reduce or eliminate the environmental
impact of general technologies; 3) resource management (such as renewable energy and
water supply).

Estimates of the size of the eco-industry given here are based on official statistics on
environmental expenditure, narrowly defined, across the economy as a whole. There are two
main caveats in reading and interpreting these statistics.

• Firstly, all technology affects the environment somehow, so OECD and Eurostat only
include expenditure clearly driven by environmental protection considerations. This
means, in practice, that if a firm develops an engine that is cheaper to run, but that just
happens to be cleaner as well, then this is not seen as an 'environmental technology' in
terms of this statistical definition.

• Secondly,

the data probably underestimate expenditure on cleaner products and
cleaner (integrated) technologies because of measurement difficulties, such as identifying
cleaner products, which means that they are only partially included in the estimates.

It is a particular problem that the data do not capture many win-win solutions, which represent
both a business opportunity and improve the environment. As a result, estimates of the size of
the eco-industry can only be used as a rough indication of current market developments in
some areas more directly related to environmental protection and natural
resource
management, and they do not capture the full range of environmental technologies in use.

In 1999, the overall turnover of the EU15 eco-industry sector was
183 billion (a figure
corresponding to 2.3% of EU GDP) and some 1.6 million people were directly employed in
this sector (1% of total employment)5.6

€

€

the EU15 eco-industries relating to pollution management, cleaner
The turnover of
technologies and products was
127 billion (equivalent to 1.6% of GDP), employing around
1 million people7. Figure 18 shows that the biggest area of expenditure is wastewater
treatment closely followed by solid waste management. The 'Others' category illustrates the
diversity of the sector. It includes expenditure on noise and vibration; monitoring analysis
and assessment; clean up of contaminated soil; environmental R&D and administration and
management. In other words, production of environmental technology is spread across the
economy and includes both low and high-tech applications.

5

6

7

8

Ecotec, 2002
The comparison to Gross Domestic Product (GDP) is provided only to indicate the orders of magnitude
involved. Turnover and GDP are not directly comparable. In the EU, the best estimate of the share of
GDP allocated to environmental protection and resource management is of an order of 3%.
Ecotec, 2002
Ecotec, 2002

7

Figure 1: EU15 Pollution Management
expenditure by environmental media

13%

12%

Air Pollution
l
C
Control

Wastewater
Management

Solid Waste
Management

37%

38%

Others

€

56
Resource management activities accounted for another 650,000 jobs and an additional
billion of turnover (equivalent to 0.7% of GDP) in the EU159. More specifically, this consists
€
of water supply (
7
billion). These estimates do not include the renewable energy sector. Water supply is a rather
mature area of activity for the EU 15, but is one of the fastest growing market segments in
a global context.

33 billion), recycling of materials (

14 billion), and nature protection (

€

€

The most reliable data available for identifying EU15 trends relates to 1994 and 1999, for the
pollution management and cleaner technologies and products sector10. This data show that
over those five years the turnover for this part of the eco-industry grew by an average of
5% real per annum (compared with an average growth of around 2.5% in GDP).
Employment in this sector grew faster than turnover, at a rate of between 6 and 7% per
annum. This high rate of job creation reflects particularly fast growth in solid waste
management, an area of high labour intensity.

BOX 1 - From end-of-pipe solutions to integrated technologies

As Community and national policies were tackling the immediate environmental problems
such as managing waste or reducing air and water pollution, their implementation relied
strongly on end-of-pipe solutions. It is estimated that on average one-third of investment in
environmental technologies is in integrated technologies rather than end-of-pipe solutions,
though this share varies between Member States. In the future, we are likely to lean more on
integrated technologies that prevent pollution from arising in the first place as we address
complex problems such as climate change and resource efficiency.

Integrated technologies are often economically more advantageous as they avoid the extra
cost of add-on equipment and lead to more efficient production processes. One objective of
policy is to make integrated environmental technologies profitable so that the market will
freely support
them. The move from end-of-pipe applications to integrated technology
solutions should enhance the potential contribution of environmental technologies to Europe’s
economic development.

9

10

Ecotec, 2002
Analysis reported in Ecotec, 2002

8

€

The turnover of the Candidate Countries eco-industries relating to pollution management,
cleaner technologies and products is around
10.3 billion (equivalent to 1.9% of GDP), and
with around 770,000 people employed11. Real growth in turnover has averaged roughly 10%
per annum since 1995 with the need to implement the EU environmental acquis being a key
driving force. Much of this investment has so far been in pollution management technologies,
reflecting the need to invest in an infrastructure that can support sustainable development.
However, further growth in investment will still be needed to meet the acquis, and growth in
investment is not expected simply to stop with accession.

4.

THE GLOBAL ENVIRONMENTAL TECHNOLOGY MARKET

€

According to some estimates the global market for environmental technologies is worth
550 Billion12, with the EU making up approximately one third of this market
around
(Figure 2 shows the demand in different regions). The USA, EU and Japan, dominate the
global environmental market accounting for 85% of it. The largest export markets for the
EU15 eco-industry are the US and the Candidate Countries, followed by South East Asia,
South America and the Middle East. Again, these figures should be treated with caution, due
to difficulties in statistical definitions.

Figure 2: The Global Environmental Market in 1999

Africa
1%

Mexico
0%

USA
37%

Rest of Latin
America
2%

Central &
Eastern Europe
2%

Middle East
1%

Australia / NZ
2%

Canada
3%

Rest of Asia
4%

Japan
18%

Western Europe
30%

In general, the evidence is that the EU has a competitive and diverse EU eco-industrial
exports sector, and is a major global player. Official trade statistics are only available for
around a fifth of the eco-industry's output but, for this visible portion, the EU had a trade
surplus with the rest of the world of over a billion Euros in 199913. Over the last two years
though, the trade surplus has declined slightly as other countries develop their own eco-
industries - illustrating the pressure on EU firms to stay competitive.

11

12

13

Ecotec, 2002
Based on estimates contained in Environmental Business Journal (EBJ) Volume XIII, Number 3/4,
2001, “The Environmental Goods and Services Industry in the EU to 2010’, IPTS Seville (European
Commission), 1999.
Ecotec, 2002

9

BOX 2 - Examples of export success stories

• Denmark invested in wind power in the 1980s and is now a world leader exporting a

billion Euros worth of wind turbine technology each year.

• Finland's eco-industry products (mostly pulp and papermaking technologies)

represent around 20% of all Finnish exports.

• France is the world’s leading exporter of water and waste management services,
mainly as a result of the success of two companies, Suez-Lyonnaise-des-Eaux and
Vivendi.

• Germany has a 17% share of world trade - second only to the USA.

• The Netherlands is very export-focussed, with 45% of products and 10% of services

exported.

• Spain has strong export markets in Latin America (particularly Mexico and Brazil)
for products and services in the fields of water purification and wastewater treatment.

• Sweden has a strong export performance in the fields of wastewater treatment,

indoor air pollution control and cleaner technologies.

It is estimated that between 1998-99 real expenditure on the products of this sector grew by
rates of 7-9% in developed markets, whereas growth in developing markets over the same
period was higher, at 10-17%, with Africa and Latin America showing the strongest growth14.
More generally, many foresight studies predict this will be one of the fastest growing
industries in the 21st century15.

Given its current competitiveness, and especially if not hindered by market barriers, the
European eco-industry seems well placed to benefit from continuing growth in these markets.
The EU seems to be particularly competitive in areas such as development of water and
wastewater treatment infrastructures, waste management infrastructures and operations, air
pollution control technologies and renewable energy goods and services.

€

For the Candidate Countries, investment will need to grow to between 2 and 3 % of GDP on
average to meet the total costs of implementing the environment acquis, estimated recently as
80 – 110 billion16. The resulting environmental benefits are estimated to have
being at least
680 billion over the next 10 years17. Both the EU15 and
a total value of between
the Candidate Countries should allow these benefits to accrue as efficiently as possible, by
ensuring all environmental technology solutions are cheaply available through a competitive
market.

130 and

€

€

The development of this competitive market will be to the mutual benefit of the EU15 and
the Candidate Countries. Already many EU15 and Candidate Country firms are entering
into joint ventures and there is evidence that as a result eco-industries are growing and

14

15

16

17

Analysis reported in Ecotec, 2002
OECD, 1999
COM(2001)304final
Ecotec, 2001

10

becoming more competitive within the Candidate Countries. Indeed, exports from the
123 million18.
Candidate Countries to the EU15 roughly doubled between 1995 and 1999 to

€

BOX 3 – The benefits of technology transfers

Not all of the benefits of trade accrue to the EU. The development of new environmental
technology in Europe contributes towards sustainable development across the world if these
new technologies are shared. In particular, the EU15's eco-industry can help the Candidate
Countries to 'leap-frog' technology levels, learning from the EU15's past experiences. By
developing new technologies that lower the costs of environmental protection, we can benefit
both ourselves and others that can make effective use of this technology to tackle their own
environmental problems.

However, care needs to be taken that obsolete technologies (such as reconditioned cars and
factories) are not dumped in developing countries where environmental regulations are not as
strict, or that developing countries are not disadvantaged in other ways. Solutions for climate
change and transport problems, in particular, need to be spread and, for example, both the
Joint Implementation and Clean Development Mechanism as constituted by the Kyoto
Protocol have an implicit technology transfer dimension. There is also scope to promote
centres for "appropriate" and "environmental" technology which can help disseminate
environmental technologies suited to local needs.

5.

THE ENVIRONMENTAL TECHNOLOGIES OF TOMORROW: AN OVERVIEW

Technology in general is a double-edged sword. It is both a cause of a number environmental
problems and a key to solving them. Polluting technologies are undermining our basic life
support systems – clean water, fresh air and fertile soil. However, in all economic sectors
(transport, energy, industry, agriculture) there are new environmental technologies
available or emerging.

Over the last decade, new technical solutions have permitted the phase-out of harmful,
hazardous or scarce materials, replacing them with less scarce and safer materials (material
substitution). The phasing-out of CFCs in white goods and of chlorine in the pulp and paper
industry are only two examples. In many sectors, the development of new high-performance
materials has led to significant resource savings and increased recycling (dematerialization).

It is not easy to provide a comprehensive map of new inventions, innovations and applications
in the field of environment technologies, and this would be out of the scope of this report.
However, it is useful to give here a broad picture of the areas where major developments may
be expected and where the scope for the use of innovative solutions may be the greatest. The
experience of recent years provides robust evidence for this potential, while giving indications
about
the technologies mentioned below are given only as
illustrations, and will not necessarily be the best or most cost effective solutions in the long
run.

future trends. However,

18

Ecotec, 2002

11

Energyconversion,conservationanduse

Global energy use has risen nearly 70% since 197119 and is poised to continue its steady
increase over the coming decades. Worst case scenario estimates are that by 2010 global
energy consumption - and CO2 emissions - will have risen by more than 40 percent from
their 1990 levels20. Despite a continued fall in energy intensity in most advanced countries,
the link between economic growth and increased energy use is far from being broken. The
main problem is not the use of energy in itself but the fact that the main source of energy is
fossil fuels, which supply roughly 80 per cent of the world’s commercial energy21, with
serious effects on the air, the atmosphere and the climate.

The Commission’s Green Paper on Security of energy supply22 outlines options for a future
i.e.
strategy in the framework of the general objectives of Community energy policy,
competitiveness, security of energy supply and environmental protection. A number of the
proposals in the green paper are already in an advanced stage of implementation, while others
will be launched as part of the Commission’s work programme for 2002. The EU’s
commitment to the Kyoto Protocol is in general a strong driving force behind this policy
development.

Certain EU initiatives have been in operation since the early nineties such as SAVE (energy
savings, energy efficiency) and ALTENER (renewable energies), whereas others are only in
their early stage of implementation such as the agreements on car fuel efficiency with the
European car manufacturers and importers. However, renewable energies have been slow to
increase in overall terms. Hydropower has little additional potential and biomass – the other
significant source of renewable energy – has stayed stable in spite of good potential for
expansion. Wind energy is still at a modest overall level (apart from a few regions), but has
shown impressive growth during the nineties (doubling every 2-3 years) and is seen as a
major contributor to an overall doubling of renewables to 12% in 2010.

There are also EU initiatives in the pipeline relating to energy conservation in buildings, and
the energy efficiency of appliances. Energy conservation techniques have significant
potential for reducing energy demand from the residential and tertiary sectors
(representing 41% of total energy demand23). Some estimates suggest that a combination of
appropriate building techniques (including thermal insulation, glazing technology, etc.) and
new energy management systems could achieve savings in emissions of greenhouse gases
from building of up to 20-25% over the next 10 years24. In the field of appliances, the
challenge is to overcome consumers' preference for lower price at acquisition rather than for
lower cost of actual use.

19

20

21

22

23

24

IEA, 2001
See, for example: IEA, 2000; US EIA, 2000; IIASA & WEC 1998
IEA, 2001
European Commission’s green paper "Towards a European strategy for the security of energy supply"
COM(2000)769
ECCP, 2001
ECCP, 2001

12

Transport

Transportation of all types accounts for more than one quarter of the world’s
commercial energy use (32% in the EU and still rising25), with greenhouse gas emissions
rising as a result. The transport sector is practically 100 per cent dependent on oil and
consumes about half of the world’s oil production26. Energy use per passenger has shown
little or no improvement over the last decades. The increasing use of more powerful vehicles
and lower occupancy rate has outweighed increases in vehicle energy efficiency. As a result,
growing transport volumes have led to a 21% increase in energy consumption between 1990
and 199927. In addition, the ‘external’ social and environmental costs of transport are
estimated as being around 8% of GDP, and more efficient environmental technology
would reduce these costs28.

The recent Commission White Paper on the future Common Transport Policy29 proposes to
break the traditional link between economic growth and environmental impact from the
transport sector. Important initiatives in this context are improved efficiency in the broadest
sense, modal shift towards environmentally friendly modes (rail, inland waterways, short sea
shipping), internalising environmental costs in transport prices, promoting alternative fuels
and public transport. A number of these measures depend fundamentally on development of
environmental technologies, such as hydrogen/fuel cell vehicles.

On a broader scale, the use of information technology for the management of transport, or
Intelligent Transport System (ITS), can significantly contribute to reduced traffic
congestion and related environmental impacts. ITS for road traffic management are already
operational in various places in Europe, but there is scope for their wider use. The Galileo
project will be crucial in realising the full potential of ITS.

Resourceuseinindustrialproduction

Although the environmental pressures caused by industry are generally decreasing30,
industrial production is a non-negligible source of pollution and industrial emissions have
traditionally been subject to regulatory controls. In 1999, manufacturing industry still
accounted for some 28% of total energy consumption and 20% of carbon dioxide and
sulphur dioxide emissions in the EU3132. According to these European Environment Agency
estimates, industrial eco-efficiency in the EU has improved during the last decade, but this
result masks diverging trends between individual Member States. Industrial pollutants are
particularly characteristic of heavy industries, such as iron and steel, petroleum refining, pulp
and paper, and organic chemicals.

There is a big potential to reduce the environmental impacts caused in the production of bulk
materials by developing and using technologies that are new, emerging or already
technologies at an early stage of
commercial. Examples of
development include alternative cement-like materials, non-consumable anodes and wetted

significant potential

25

26

27

28

29

30

31

32

EEA, 2001a
IEA, 2001
Eurostat, 2001
INFRAS, 2000. There is a considerable degree of uncertainty in estimates of this type.
European Commission’s White Paper, “European transport policy for 2010: time to decide“, COM
(2001) 370
EEA, 2001c (notably Figure 1.4 on page 11)
EEA, 2001c
EEA, 2001b

13

cathode technology in aluminium production, and smelting reduction in iron making. The use
of raw renewable (i.e. plant-derived) materials (RRM) as industrial feedstock is already rather
well established in some specific sectors of the chemical industry. A wider distribution of
RRM-based products as well as the possibility to produce RRM-based bulk chemicals would
substantially help to reduce industrial pollution.

A range of new biotechnological techniques is also becoming available and offers the
prospect of reductions in raw material and energy consumption, as well as less pollution and
recyclable and biodegradable waste, for the same level of production. Biotechnology is
considered to be a powerful enabling technology for developing cleaner industrial products
and processes, such as biocatalysis. Benefits have been shown for traditional industries like
textiles, leather and paper. Bioremediation also has the potential to clean-up polluted air, soil
and water: bacteria have been used for a number of years to clean up oil spills and purify
wastewater.

Wastemanagement

The European Environment Agency estimates that over 250 million tons of municipal waste
and more than 850 million tons of industrial waste are produced by the EU15 each year.
The annual rate of growth, estimated at around 3%33, has outpaced GDP growth over the last
decade. On the other hand, increased perception of unsustainable trends, reflected in higher
charges on waste production and stricter rules on waste collection and disposal, has made
waste management a very dynamic field.

Technologies in this field cover a broad spectrum of treatment methods, e.g. better
collecting devices and vehicles for a more effective recycling of materials like paper, metals
and glass; better mechanical separating devices, new large scale technologies for treating
organic waste. All together, these new technologies provide a good basis to substantially
reduce landfilling and to utilise the generated waste in an optimal way.

Another interesting perspective is that new potential for energy recovery is emerging
from various waste fractions (like different kinds of sludge, waste tyres, etc.). This could
lead to considerable energy production, though it must be in combination with effective flue
gas cleaning systems,
to avoid generating noxious air pollutants. The best available
technology allows the majority of the energy content in waste to be utilised.

Fisheries

One of the main threats to marine biodiversity is fishing, in particular due to its impact on
non-target species and the physical damage to the sea bottom by certain equipment.
Considerable progress has been made in the development of sorting grids, deterrents and low-
impact bottom trawling. However, there is considerable scope for further progress in
developing equipment that limits these side effects, and given the worldwide nature of the
problems, the eventual technical solutions may have a considerable market. Similarly, the
expanding aquaculture would benefit from the development of environmental technology in
fields such as foodstuffs, containment, reduction of waste and plague control.

33

EEA, 2001b

14

InformationandCommunicationTechnology

The effective orientation and acceleration of information and communication technology
could be a key development. It could allow greater efficiencies in resource use to be realised
by process improvement, product improvement, product to service conversion or structural
change.

Process re-engineering for e-business can reduce material use and transport; unused stocks
the number of
and warehousing can be reduced; better transport and logistics can cut
journeys, and empty trucks; more effective use can be made of office and factory space etc 34.
The “information content” of products in terms of their market value has risen faster than
through better design,
their material content has fallen. The further addition of value,
additional features and usability, and the use of more appropriate materials can de-couple
growth from resource use.

With advanced communications, other products could become services. A newspaper
becomes an on-line news service; an instruction manual becomes an interactive technical
advice service; access to health care advice and information on-line can improve the quality
of care and avoid unnecessary travel. On-line banking provides a more convenient service for
many people, without the materials and resources of the retail branches, and the need to travel
there.

Overall, the emergence of information infrastructures will change the ground rules of an
industrialised society allowing us to make structural changes in the organisation of our
transport infrastructures and the way we work and live. Over 10 million people already
“telework” in Europe, and about 25% of the workforce used a computer for work-purposes at
home in 200135. New workplace designs make better use of space, in more energy efficient
buildings, in locations nearer to where people live. Over 50% of European businesses now
make use of eWork services provided over communication networks. These changes can help
to decouple economic growth from transport growth, and bring new work opportunities into
local communities.

6.

REALISING THE FULL POTENTIAL OF ENVIRONMENTAL TECHNOLOGIES

Thecontextfortargetedpolicyaction

Whilst the potential of environmental technologies is significant, much of this potential
remains unrealised because of various obstacles which hinder their development and market
penetration. Many of the barriers to the introduction and diffusion of new environmental
technologies are common to other new technologies. In the development phase, lack of
finance for development, risk aversion and uncertainty, insufficient information about the
efficiency of the technology, and lack of the necessary expertise are among the factors that
limit the development of new technology (see Figure 3).

34

35

Case Studies of the information society and sustainable development: May 2000 DG-Information
Society – C1.
EuroBarometer, Nov 2001: “Quality for Change” A report of the European Commission services –
DG-Employment March 2002

15

These problems are made worse if the regulatory environment is unpredictable. Obviously,
economic risks and innovation costs also play a role in this context, particularly for small and
medium size enterprises, and once developed, market segmentation and lack of competition
can delay the process of diffusion of new technologies. In this respect, the lessons from
technology policy are entirely applicable to the area of environmental
general
technologies. 36.

Figure 3: Factors seriously delaying innovating projects37

Services
Manufacturing

Poor customer responsiveness

Lack of information on markets

Regulations and standards

Lack of information on technology

Economic risks

Lack of access to sources of finance

Innovation costs

Organisational rigidities

Lack of qualified personnel

0

5

10

15

20

25

30

35

40

45

per cent

However, the case for policies to foster innovation in the field of environmental
technologies goes beyond the general case for technology policy. The environment in the
form of clean air and water, a stable climate and abundant natural resources and bio-diversity
is a common good. Missing,
these common
environmental goods mean that the expected rate of return from investments in environmental
technologies is lower than it would be if prices reflected the full value of environmental goods
or services. This
in innovative environmental
technology by both firms and households. This means both that cost effective solutions for
environmental problems are not taken up, and that there is less incentive to research and
develop such technologies.

leads to systematic under-investment

inefficient markets for

incomplete, or

In response, Community policies are already promoting environmental technologies in a
variety of ways. This includes attempts to "get prices right" by promoting the use of economic
instruments. The proposed EU greenhouse gas emissions trading system is a good example.
This will create a permanent stimulus to find new ways of cutting emissions in the
installations covered, as operators will be able to sell the resulting emission allowances.

36

37

The European Commission's Communication Innovation in a knowledge-driven economy, COM (2000)
567 of 20 September 2000, reviews recent progress in the Union to stimulate innovation by enterprises,
explores what the current priorities should be in order to promote innovation, and defines broad policy
lines for pursuing these priorities.
European Commission, 2000 ‘Statistics on Innovation in Europe, 2000

16

However, despite current policies, it is clear that more needs to be done to address the specific
barriers that new environmental technologies are facing to their development and take up.

Policies need to be sensitive to the problems that specific environmental technologies face, as
these problems also vary across the learning curve. Even when new solutions have been
developed, there may be other issues around market penetration which slow adoption and use.
In particular, firms and households will not voluntarily adopt environmental technologies that
are relatively expensive. This is why a focus of policy has to be on reducing the cost of
they can be voluntarily adopted by business as a
environmental
replacement for older, more polluting technologies.

technologies, so that

Indeed, cost factors show one aspect of the interrelationship between environmental and
innovation policies. In addition, innovation policy needs to pay attention to time-related
considerations, notably natural investment cycles. Incorporating environmental advances is
least costly when equipment needs to be replaced in the course of the normal investment
cycle. For example, the life cycle of a heavy process industry’s investment is 20 to 30 years
with the moment of investment being an important determining factor for the technology’s
environmental performance. Choosing the right time to introduce a technology ensures that
any impact on growth is made as favourable as possible.

Environmentalpolicy

EU environmental policy can have considerable influence on innovation, and it is important
it makes the most of this influence. For example, by setting policy priorities the
that
Community is providing clear directions on where new technologies are most urgently
needed.

Increasing predictability and coherence of the legislative framework facilitates long-term and
consistent planning and avoids incremental change that drives up costs for researchers and
investors alike. In this context, the 6th Environmental Action Programme "Environment
2010: Our Future, Our Choice"38 identifies four environmental priority areas for the next 10
years: tackling climate change, protecting nature and bio-diversity, improving environmental
health and our quality of life and managing natural resources and waste. Specific goals and
targets have already been set most notably for action on climate change, including the Kyoto
objectives. Specific targets also exist in a variety of environmental legislation.

The 6th Environment Action Programme also recognises the need for environmental policy to
better use the ability of business to develop innovative solutions that will be adopted in the
market and to create proper incentives in the market itself. It acknowledges the important
role of consumers in influencing the market for environmental technologies. One of the
major tools for harnessing business's expertise will be an Integrated Product Policy, which is
concerned with cost-effectively reducing products' impacts throughout their life cycle through
a range of instruments. This will involve creating the conditions needed for the efficient
development and use of environmental technology.

The Directive on integrated pollution prevention and control (IPPC) is an important driver
for the development and dissemination of environmental technology. Operators of certain
industrial installations must apply for a permit based on best available techniques (BAT). The
Commission organises a comprehensive information exchange resulting in “BAT reference

38

Information about
http://www.europa.eu.int

the European Commission’s

environmental policies

can be

found at

17

documents” (BREFs) that define the best available techniques at the time. Permit conditions
will be updated to reflect changes in BAT. IPPC therefore reflects a dynamic concept
allowing for continuous uptake of new environmental technologies.

Voluntary measures can encourage business and households to identify opportunities.
One such tool is the Community’s Eco-Management and Audit Scheme (EMAS) which
encourages companies to continuously assess and improve their environmental management
and processes. The EU eco-label provides information to consumers so that they can identify,
and reward, environmentally friendly products.

New environmentally friendly ways of working are of little use if they are not then
widely adopted. The EU Employment guidelines encourage Member States to exploit the
employment potential of this sector to the full39. The LIFE Programme provides support for
innovative and demonstration actions by industry and local authorities. This helps firms to
demonstrate the business sense of new environmental technologies.

Energyandtransportpolicies

The energy and transport sectors are characterised by high volume, highly developed and
comparatively cheap technology (cars, thermal power plants etc.). New technologies often
face an uphill struggle because they will have to go through a technical development process
and will initially be produced in much smaller quantities. Wind energy is a relevant case. 10
years ago wind energy was uncompetitive but thanks to financial and other incentives the
technology has improved and production volumes increased to the point where costs have
come down to levels comparable to fossil fuel based electricity (with optimal wind
conditions).

Existing technology also has an advantage by simply being established. Natural gas driven
cars can be produced at roughly the same price as gasoline driven. And natural gas costs
roughly the same as gasoline. Nevertheless very few would buy a natural gas car because of
lack of refuelling points and refuelling points are not being established as long as there is no
demand.

Our policies are creating more favourable conditions for the development and market
penetration of innovative energy and energy-efficiency technologies in which the EU already
enjoys a strong market position. At the same time this contributes to the security of the EU’s
energy supply and to the attainment of our climate change and other environmental
objectives. Similarly, the White Paper on the future Transport Policy40 proposes a number of
measures to improve the environmental performance of transport, partly to shift to less
environmentally harmful modes of transport.

Fiscal incentives may enhance energy saving. Wider use of economic instruments and price
incentives in both the energy and transport fields, with proper internalisation of external costs,
would be an important spur to the take up of cost effective environmental technologies. This
idea is already included in the EU employment guidelines, as taxing pollution would allow
other taxes, such as those on labour, to be reduced. Employment guideline no. 12 states that
each Member State will examine the practicability of and options for using alternative sources
of tax revenue, such as taxing energy and pollutant emissions, taking into account the
experience with environmental tax reforms in several Member States.

39

40

Employment guideline no. 10
European Commission, COM(2001) 370

18

Researchpolicy

Objectives and present actions

Industrial production is a key area of human activity, and has been taken into consideration
within the 4th and 5th Research Framework Programmes (FP4: BRITE EURAM and FP5:
GROWTH). The budget of the GROWTH programme is
2.7 billion. Approximately two
thirds of the programme’s projects have a clear objective related to sustainable development.
In turn, approximately one third of these are mainly aiming at improving the environment by
reducing industrial impacts (clean production, eco-efficient processes and design, production
with zero waste, life cycle optimisation and material recycling, new light materials).

€

improving the environment but also at

Research on new industrial technologies or methodologies, and risk prevention aim not only
at
improving cost effectiveness and therefore
competitiveness. Through European research programmes, industry and associated research
organisations can share the cost of research actions, while using a system-oriented approach,
in which chemistry, physics, engineering, life sciences and social sciences are essential and
interdependent.

The "Energy and Environment" research programme is also a key research area for the
development of advanced environmental technologies for the energy and transport sectors; it
also contributes to the development of technologies for the monitoring of environmental
policies and sustainable management of natural resources like water and marine ecosystems.

Future EU research actions (2002-2006)

The European Research Area allows research capacities dispersed across the Member
States to be complementary and mutually supporting. Its principal instrument is the 6th
Framework Programme for research, which supports research into new products and services
as well as looking for other ways of better applying know-how (for example, how better to
manage or monitor environmental activities).

One of the thematic priorities of the programme will be "Sustainable development, global
2 billion should be provided
change and ecosystems", under which funding of more than
over the next 5 years. Amongst other things, this theme will fund research on environmental
technologies and,
in particular, on sustainable energy, sustainable surface transport and
natural resources management.

€

Another programme priority will target sustainability of industrial systems. This priority
"Nanotechnologies and nanosciences, knowledge-based multi-functional materials and new
1.3 billion. It will include a focus on
production processes and devices”) has a budget of
(e.g.
new industrial approaches that
development of new devices and systems for clean, safe and less carbon-intensive production,
sustainable waste management and hazard reduction, and bioprocesses).

reduce the consumption of primary resources

€

In the area of information society technologies, research under the heading “work and
business challenges” will include a focus on “increasing resource-use efficiency” across the
whole range of business activities. The work on “social challenges in a knowledge economy”
will continue to explore and develop more resource efficient methods of health-care, e-
mobility and environmental management. Additional funding will support environmental
research in such fields as SMEs, biotechnology, agriculture, chemicals and health.

19

The key to getting the most out of research spending is the proper exploitation of the results
of research and using the public research programmes to help make new products and
services
regularly review
environmental research needs and priorities to enhance the delivery of robust and applied
research.

commercially viable. The Commission will

therefore

Tradepolicy

In November 2001, a new round for trade liberalisation was launched at the 4th WTO
ministerial session in Doha. The EU, like many WTO Members, strongly believes that the
multilateral trading system has a key role to play in the achievement of global
sustainable development. The Doha Development Agenda (DDA)41 will provide an
opportunity to maximise the contribution that trade liberalisation can make in achieving
sustainable development and globalisation with a human face.

and

In particular, the DDA provides that, ‘in order to enhance the mutual supportiveness of trade
and environment, negotiations will start on the reduction or, as appropriate, elimination of
tariff
The
definition/classification of environmental goods will need to be refined in upcoming
negotiations, while that for environmental services is well positioned for negotiations in the
context of the General Agreement on Trade in Services (GATS).

environmental

non-tariff

services’.

barriers

goods

and

to

The DDA also provides for the examination of the relationship between trade and transfer of
technology, to increase flows of technology to developing countries. An essential component
needed to increase these flows will be the enhanced enforcement of intellectual property
rights in recipient countries.

In short, trade policy has an important role to play in a sector that has the potential to support
sustainable development worldwide, and in which the EU has an important market presence.

7.

CONCLUSIONS

As this report shows, environmental technologies offer a natural bridge between our
economic, social and environmental goals. New and innovative environmental technologies
have the potential to raise environmental standards while lowering costs, which would boost
economic growth and allow the economy to grow faster without going beyond our
environmental carrying capacity. This is central to sustainable development.

Whilst
the Lisbon Strategy and existing Community measures will help promote
environmental technologies, they are not enough in themselves. To realise the full potential,
we need to analyse the market barriers to the use of environmental technologies and tackle
them through a mix of targeted policy measures. This is why the Commission intends to
develop an action plan for promoting environmental technologies along these lines, as
announced in the Synthesis Report to the European Council in Barcelona42.

The Action Plan will build on a rigorous analysis of the issues as well as a broad
consultation of
the research community, NGOs and
governments, both within the EU15 and the Candidate Countries. The objective will be to

from industry,

stakeholders

41

42

Found at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.pdf
European Commission, COM (2002) 14

20

the innovation, development and use of environmental

support
technologies that can
contribute to growth within the current and future enlarged EU, as well as in developing
countries. The Action Plan will involve:

– a survey of promising technologies that could address the main environmental problems

– the identification, with stakeholders, of the market and institutional barriers that are

holding back development and use of specific technologies

– the identification of a targeted package of measures to address these barriers, and building

on existing instruments

Whilst the work will be ongoing, the first milestones will be the holding of a Stakeholder
Forum and then a report on the Action Plan to the 2003 Spring European Council.

21

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23