Opinion of the European Economic and Social Committee on Sustainable development as a driving force for industrial change
Date: 2006-09-14
Institutions: European Economic and Social Committee
Subjects: EU industrial policy, competitiveness, economic and social cohesion, energy industry, industrial restructuring, raw material, sustainable development

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II

(Preparatory Acts)

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

429TH PLENARY SESSION, HELD ON 13 AND 14 SEPTEMBER 2006

Opinion of the European Economic and Social Committee on Sustainable development as a driving
force for industrial change

(2006/C 318/01)

On 14 July 2005 the European Economic and Social Committee, acting under Rule 29(2) of its Rules of
Procedure, decided to draw up an opinion on Sustainable development as a driving force for industrial change.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 31 August 2006. The rapporteur was Mr Siecker and the co-
rapporteur was Mr Činčera.

At its 429th plenary session, held on 13 and 14 September 2006 (meeting of 14 September), the European
Economic and Social Committee adopted the following opinion by 98 votes to 11 with 11 abstentions.

Part 1: Summary of the EESC's conclusions and recommen-
dations

the environment. The aim of the present own-initiative opinion
is to examine how sustainable development can be a catalyst for
industrial change.

A.
In January 2003 the EESC adopted an own-initiative
opinion entitled Industrial change: current situation and prospects —
An overall approach. The goal of that opinion was not only to
provide an overview of
the most pressing industrial change
issues and trends, but also to highlight the role of the CCMI and
its future work. Among the areas of responsibility assigned to
the CCMI in this context the following were to be found:

from the
— ‘analysing industrial
economic, social,
territorial and environmental points of
view, as well as assessing the impact of industrial change on
sectors, firms, workforces, territories and the environment.

change and its

causes

— seeking common approaches

to promoting sustainable

development […].’

The abovementioned opinion also stressed the need to ‘combine
competitiveness with sustainable development and social and
territorial cohesion’ in keeping with the Lisbon strategy. More-
over, it proposed a working concept of ‘industrial change’ that
embraced both the developments affecting companies and the
interaction of these with their environment.

So far, the CCMI has focused mainly on assessing the impact of
industrial change on sectors, firms, employees, territories and

B.
That same opinion concluded that change in the European
industrial sector has often been approached from the restruc-
turing angle but that it is a much more dynamic concept. The
business world is closely linked to the European political and
social environment in which it develops and which,
in turn,
influences the process of industrial change. Fundamental indus-
trial change comes about in two ways: through radical action
and through gradual adaptation. Precisely, the aim of this own-
initiative opinion is to consider how sustainable development as
Brundtland defined it (a development that meets the needs of
today without endangering the supply of the needs of future
generations) can act as a catalyst for gradual and proactive
industrial change.

The opinion provides,

C.
in the main, examples from the
energy and related sectors but the same processes as described
here can be applied to others. The reasons for this choice of
sectors are several:

— the Brundtland definition of

the need to move towards

sustainable development
renewable natural

implies
resources;

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— energy is a cross-sector issue;

working environment and in a climate where there is room for
both workers' rights and fruitful social dialogue.

— lessons to be learned from the introduction of new technol-
ogies in this field may be extrapolated to other sectors;

— the 25 Member States currently import about 50 % of their
required oil and gas; this could rise to 70 % by 2030, at
which time the Commission predicts most suppliers will hail
from ‘geopolitically uncertain zones’.

D.
The moment when a particular technology becomes avail-
able is determined by R&D. The moment when it is actually put
in use is determined by the market, however. The gap between
the two can also be influenced by politics. Thanks to a balanced
mix of policy measures — subsidies, promotion, taxes — busi-
ness in Sweden and Japan began at an early stage with the tech-
nological development of heat pumps and solar panels respec-
tively. Partly as a result of this, these countries have succeeded
in building a market-leading position.

The EESC reaffirms that the three pillars of the Lisbon
E.
strategy are of equal importance. However, it is often stressed
that there is scope for environmental and social considerations
only against a background of a healthy, growing economy. That
is an overly simplistic explanation of the strategy as the reverse
is also the case. Certainly there is no scope for a healthy,
growing economy against a background of a sick environment
or of a society driven by social dissent. The Committee
welcomes the actions that have been taken in this field and
which are described in Annex 2 of the Commission Communi-
cation on the Review of the Sustainable Development Strategy
— A platform for action (1).

F.
Sustainability is not just one of the options on a list;
rather, it constitutes the only possible course of action in order
to secure a viable future. The concept of ‘sustainability’
is an
overarching one and is therefore not restricted to the environ-
ment, but also embraces economic and social sustainability
issues. Continuity of a business is a form of economic sustain-
ability which can best be achieved by maintaining profitability.
Europe can contribute to this by strengthening competitiveness
through innovation and by stimulating research and develop-
ment through active policy and a mix of targeted measures (see,
for example, Sweden and Japan).

G.
Social sustainability means allowing people to live healthy
lives and to generate an income while guaranteeing a reasonable
level of social security to those who are not able to do likewise.
The EESC maintains that Europe can contribute in this area by
striving for a society that enables people to maintain their voca-
tional skills, by offering them decent work in a safe and healthy

(1) COM(2005) 658 final, 13.12.2005.

H.
The eco-industry offers a lot of opportunity for economic
growth. Europe has a strong position in a number of sectors in
this industry. In order to retain and develop its strengths and to
achieve similar positions in other sectors, the EESC feels that
Europe has to display greater ambition.

An industrial policy directed at sustainable development
I.
can contribute to the competitiveness of the entire European
economy, including not only to the new rising sectors, but also
to the traditional industrial sectors. The EESC wants the Euro-
pean Commission to support such a policy. Examples described
in this opinion show that well thought-out and implemented
support
feed-in tariffs,
promotion and regulation) during the introduction of new
environmental technologies can help to create a market for
these technologies that can then be developed further without
support. Any support mechanism must be clearly degressive as
the cost of state aid should not restrict the international compe-
titiveness of other industries.

(combination of

taxation,

schemes

J.
The EESC notes that subsidies and incentives are not
always efficient and can incur large financial costs with little
economic effect if used improperly. Subsidies and regulations
should help the market start up and develop initially until the
technology is ripe to permit survival without any support. The
key factors of successful support are as follows:

— right duration;

— proper specification;

— degressive in time;

— announced well in advance;

— cooperation between government and private sector.

K.
Sustainable development is not to be limited to a Euro-
pean context, as it has a global dimension. European sustain-
ability policy should be endowed with instruments to prevent
reallocation of labour to other regions. In order to ensure a
level playing field, a two-pronged approach is needed: internally
to the EU on the one hand and externally to the EU on the
other. Regarding the former, appropriate instruments should be
introduced to ensure that
social and environmental costs
resulting from non-sustainable production methods within the
European Union be internalised in the price of goods to
promote the main thrust of the report of the World Commis-
sion on the Social Dimension of Globalisation for policy coher-
ence amongst the ILO, WTO, IMF and World Bank (see CESE

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in relevant

international

fora (in particular WTO)

252/2005). In terms of the latter, the EU should make every
effort
to
include non-trade concerns such as fundamental social and
environmental standards into international agreements on trade
to facilitate the upgrading of
the sustainability policies of
Europe's competitors. Countries such as the United States, India
and China have an unfair economical advantage compared to
Europe as long as they are not bound by the Kyoto protocol's
CO2 reduction targets. Those agreements should be imple-
mented on a global scale as trade can only be really free when it
is also fair.

Ideally, the best way to stop these processes would be to
1.5
stop burning fossil fuels as we are at present. However, in the
short term this is both politically and economically impossible.
We have to adopt other approaches,
for something has to
change — if not as fast as desirable, then at least as fast as
possible.

By applying the trias energetica (2), a model whereby more
1.6
efficient energy use can be stimulated in three steps, a start can
be made in the short term on moving towards more sustainable
consumption and production. These steps are:

Part 2: Arguments to support the opinion

— reducing demand for

energy

through more

efficient

consumption;

1. Overview

— making maximum use of sustainable, renewable energy

sources;

1.1
Our economy is currently based on the availability of
cheap energy and raw materials. But supplies are finite, which is
partly why they are becoming considerably more expensive.
Structural and technological change which are possible, are
needed and Europe has to contribute to that change so as to
help European industry to meet that challenge. Sectors which
involve high levels of consumption of energy and raw materials
have to turn to more sustainable production in the future in
order to reduce the drain on natural resources. Because these
sectors will still be needed in the future as the production of
starting and semi-manufactured materials is the basis of indus-
trial value.

1.2
Sustainably producing European energy-intensive indus-
tries which compete internationally must not be forced out of
the market by competitors from outside the EU using less
sustainable production methods. To prevent this occurring a
level playing field must be created for those sectors in coopera-
tion between civil society and government.

1.3
The greatest challenge confronting us is the development
of a sustainable society which can maintain the present level of
prosperity and at the same time neutralise the negative side-
effects of current patterns of consumption. One of the main
conditions for this is that we learn to cover our energy needs
differently and transition to a different
industrial
production.

form of

The need for gradual transition to a more sustainable
1.4
model of society is beyond dispute. There are several reasons for
that requirement. Experts differ on the period of time fossil
fuels will be available for a reasonable price, but everyone agrees
that they will become increasingly rare and expensive. In addi-
tion, and due to our consumption habits we are facing one of
the greatest threats of our age: climate change.

— applying efficient

technologies

that enable the use of

remaining fossil fuels in a cleaner way.

1.7
For this a package of measures is needed both to put
these three objectives into effect and to bring about a switch to
more sustainable industrial production. These measures must be
based on an economic and strategic calculation. When making
such calculations, there inevitably comes a time when choices
have to be made between conflicting interests. We must not
avoid these conflicts. So-called ‘win-win situations’ do exist and
policies should always be directed towards their creation, but, in
practice, that can be very hard. In such a case, choices have to
be made between opportunities for sustainable change and the
protection of existing interests, taking into account the natural
rise and decline of any one sector over another. Such existing
should be made transparent and
and conflicting interests
addressed.

1.8
The concept of sustainability dictates that economic,
environmental and social aspects of the development of Euro-
pean society are equally important. This opinion will:

— focus primarily on renewable energy sources and the striving
for energy and raw-material efficiency (chapters 2 & 3);

— look at the opportunities of sustainable development in a

selection of sectors (chapter 4);

— address a number of the social aspects (chapter 5).

(2) Energy triad — an approach to energy sustainability developed by Delft

University of Technology.

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2. Renewable energy sources

2.1 Introduction

It should be noted that hydro-electric power sources do
2.1.5
not form a subject of a specific paragraph, as this technology
(apart from tidal energy) is considered both fully-fledged and
fully operational. This should not be seen as detracting in any
shape or form from its importance in the sustainability context.

reserves of

energy. Total

Every year the Earth absorbs 3 million exajoules (EJ) of
2.1.1
fossil
to
solar
300 000 EJ, 10 % of
insolation. Total annual
total annual
energy use is 400 EJ. The 3 million EJ of energy absorbed are
available in the form of 90 EJ of hydroelectric power, 630 EJ of
wind energy and 1 250 EJ of biomass. The rest is available as
solar energy (3). Thus, in fact there is enough sustainable energy
to cover our needs. Accessing it is the problem.

amount

fuels

2.1.2
As, given the cost aspect and the lack of appropriate
technology, renewable energy sources will not be able to meet
rising energy demand in the short term, other energy sources
will be needed. There is potential for fossil fuels to be used
cleanly, for example by removing the CO2 and subsequently
storing it to prevent its release into the atmosphere. The devel-
opment of technology for capturing and storing CO2 is in full
swing: a dozen or so pilot installations are already either in the
startup phase or under construction in Europe, North America
and China. The use of this technology can be expected to break
even as early as 2015/2020.

The duration of support schemes for renewable energy
2.1.3
is crucial, as premature withdrawal may jeopardise the new
industry, and on the other hand, prolonged support is not effi-
cient. Typically, support can be gradually phased out, as R&D
and economies of scale push the price of the technology lower.
the support scheme is also of high
Proper specification of
importance. Finally,
it is important that support schemes be
announced in advance so that business has time to prepare for
the new market conditions.

2.1.4
The nuclear energy debate is becoming increasingly
important, as is shown by the Green Paper on a European
Strategy for Sustainable, Competitive and Secure Energy (4) and
the Conclusions of the March 2006 European Council on this
subject.
In some countries there is a majority in favour of
nuclear energy, in others a majority against — mainly because
of the waste problem (5). Nonetheless, nuclear power will for
some considerable time continue to be indispensable for
meeting strongly growing energy demand, as it is an emission-
free energy source and as the volume of waste is relatively low
by comparison with the energy generated. In the long term
nuclear fusion may provide a solution to the drawbacks of
nuclear fission.

(3) Source: Energie Centrum Nederland, www.ecn.nl.
(4) COM(2006) 105 final, 8.3.2006.
(5) Eurobarometer issues 227 (on nuclear energy and waste, June 2005)

and 247 (Attitudes towards Energy, January 2006.

2.2 Biomass

Biomass is organic material

2.2.1
from plants and trees
specially cultivated for energy purposes. Wood and fast-growing
crops are used with a high yield per hectare. By-products from
agriculture, the main emphasis being on food, are also used as
biomass. Examples are straw and sugar beet crowns. Biomass
streams can also be obtained from residues, e.g. waste arising
from planting and maintenance and in households, businesses
and industry. Examples are fruit, vegetable, and garden refuse,
waste timber, manure, slurry, sawdust and cacao shells.

Biomass can be used to (partially) replace fossil fuels.
2.2.2
Annual consumption of fossil fuel energy is 400 EJ. Annual
availability of biomass energy is 1 250 EJ. But this does not
mean that an immediate switch is possible. On the basis of
available technology it is currently possible to produce 120 EJ
of energy from biomass. Current world consumption of
biomass energy is 50 EJ (6). A limited increase in the use of
biomass for fuels is therefore possible in the short term, but
technological breakthroughs will be needed to enable the poten-
tial to be exploited.

A number of

initiatives have produced promising
2.2.3
results. In Austria there has been a sixfold increase in the use of
biomass for district heating, and in Sweden an eightfold increase
has been achieved over the last ten years. In the USA more than
8 000 MW of the installed generation capacity is based on the
use of biomass. In France 5 % of energy used for heating is
produced from biomass. In Finland bioenergy already accounts
for 18 % of total energy production and the aim is to increase
this to 28 % by 2025. In Brazil ethanol is produced on a large
scale as a fuel for cars, currently ethanol provides roughly 40
percent of Brazil's non-diesel fuels (7).

2.2.4
number of points of view:

The development of biomass is important

from a

a. Environmental policy: the life cycle of biomass as a renew-
able material has a neutral effect on CO2 and SO2 emissions.
Moreover, when biomass is used on a large scale it is possible
to close the mineral and nitrogen cycles.

(6) Source: Energie Centrum Nederland, www.ecn.nl.
(7) www.worldwatch.org.

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b. Agricultural policy:

It

of

out

in Europe agricultural
production.

land has been
that
estimated
taken
is
200 million hectares of agricultural
land and 10 to
20 million hectares of marginally productive land could be
used for the production of biomass as a source of raw mate-
rials and energy. The need for more extensive agricultural
production must be seen against the backdrop of the need to
preserve Europe's rich landscapes, achieve the EU's objective
of halting the loss of biodiversity and ensuring sufficient area
is set aside for nature protection. Appropriate account of
balance in all these areas will need to be taken.

c. Social policy:

in global terms 11 new jobs are created for
every megawatt of installed production capacity. If the use of
biomass as an energy source in Europe were to rise from
4 % of energy needs in 2003 to around 10 % in 2010 (8),
this would mean 160 000 new jobs.

d. Regional policy: biomass can be used as a decentralised
source of energy where conversion takes place close to the
production site by means of small-scale power generation
plants. This can promote social stability at regional
level,
particularly in economically disadvantaged areas.

e. The requirement to produce green electricity: a European
directive requires European electricity producers to produce a
certain percentage of their electricity from renewable energy
sources. This percentage varies from country to country, but
is rising steadily. Provision is made for penalties (or the with-
drawal of subsidies) if the percentage targets are not met.
Clearly, the production of electricity from biomass, either on
its own or by burning it together with coal, will make a
significant contribution to meeting the targets for green elec-
tricity.

2.3 Wind energy

in 2020 to cover 12 % of electricity needs. This
sufficient
implies an increase in wind energy capacity from 31 GW at the
end of 2002 to 1 260 GW in 2020, growth of 23 % per year.
The market
leaders and biggest exporters are the United
Kingdom, Denmark and Germany, and the main export markets
are China, India and Brazil. The situation is going to change in
China where the wind energy machinery industry is growing
rapidly. Compared to 2004 the number of producers in China
grew by 60 % in 2005. This implies that the European wind
machinery industry may face the same scenario as the solar
industry and lose massive market share to its Chinese
panel
competitors.

2.3.3
The wind energy sector is still to some extent depen-
dent on various support measures. The most important of these
is the price which producers receive for the energy they sell to
the grid, together with the certainty of a guaranteed price level
for the next ten to twenty years. Thanks to these measures the
wind energy sector is a fast-growing industry in some Member
States. The disadvantage is that these measures lead to large,
centralised wind energy parks making large profits rather than a
fine-meshed network of small, decentralised wind energy power
plants. Public opinion is increasingly turning against this large-
scale phenomenon. Of course at the end of the day wind energy
also has to be able to survive on its own without subsidies and
feed-in tariffs.

2.3.4
The research and development effort needs to be
stepped up in order to further improve the competitive position
of wind energy. Constant attention also needs to be paid to legal
guidelines and political objectives. Further major challenges are
posed by the development of new locations for wind parks at
sea and the elimination of uncertainties regarding the imple-
mentation of wind energy.

2.3.1 Worldwide the theoretical potential of wind energy is
more than twice forecast electricity needs in 2020. This poten-
tial and its steadily improving competitive position as a result of
technological advances make wind energy an essential replace-
ment for fossil fuels. Wind energy can never cover all needs
because of its fluctuating supply.

2.3.5
number of points of view.

The development of wind energy is important from a

a. Environmental policy: wind energy is a clean form of energy
without emission of CO2 or other pollutants. Its availability
fluctuates but is enormous.

2.3.2
Over the last few decades installed generation capacity
using wind energy has increased spectacularly. The capacity of
commercial turbines has grown from 10 KW (rotor diameter
5m.)
to more than 4 500 KW (rotor diameter more than
120 m.) (9). Over the last eight years installed generation capa-
city using wind energy has grown at an annual rate of more
than 30 % (10). According to projections by the European Wind
Energy Association (EWEA), total wind energy capacity will be

(8) Biomass Action Plan, Communication from the Commission (SEC

(2005) 1573).

(9) Source: Energie Centrum Nederland, www.ecn.nl.
(10) Sources: www.ewea.org and www.wind-energie.de.

b. Social policy: in 2002 wind energy contributed to employ-
ment to the tune of 20 jobs per megawatt of installed capa-
city. However, as a result of learning effects in the design,
manufacture and installation of turbines, employment is not
increasing in proportion and the employment
is
expected to fall to 9.8 jobs per megawatt of installed capacity
in 2020. This means that employment in the wind energy
industry will increase from around 114 000 jobs in 2001 to
some 1.47 million jobs in 2020 (11).

impact

(11) Source: Energie Centrum Nederland, www.ecn.nl.

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c. Regional policy: due to the support schemes wind energy
develops into large, centralised wind energy parks. Because of
their profits they are very attractive for investors. The public
opinion is turning against this development as it is in favour
of fine meshed networks of small, decentralised wind energy
power plants.

stations. In order to break the vicious circle of low use and high
prices solar energy should be used as much as possible as this
will lead to major economies of scale in production and installa-
tion. And only then can the technology be further renewed and
improved.

2.4 Solar energy

There are two ways of using solar energy: to provide
2.4.1
heating and hot water, and to produce electricity (12). Solar
heating systems are relatively simple and cheap and are already
used in many countries.

2.4.2
The main reason to aim for the large-scale use of solar
energy is the fact that it is inexhaustible. It has enormous poten-
tial worldwide and is, providing it
is well designed and
constructed, very environmentally friendly.

2.4.3
Solar energy can be harnessed almost anywhere in the
world in the variety of ways: from very small systems in remote
places through solar panels on the roofs of houses to large solar
power generation plants.

2.4.4
Solar heating systems are in widespread use. The
largest market for these systems is China, mainly because gas
and electricity distribution infrastructure is lacking in rural
areas. In such cases solar energy is the most efficient solution.
Another large market is Turkey. Between 2001 and 2004 the
worldwide sale of solar panels grew by between 10 and 15 %
annually. China took 78 % of
total world production and
Turkey 5.5 %.

2.4.5
In Europe, Germany, Austria, Spain and Greece are
major markets for solar heating systems. The governments of
Germany and Austria offer financial incentives for the installa-
tion of such systems. In some regions of Spain the installation
of such systems in new buildings is compulsory. As a result of
these support measures Germany and Austria are by far the
largest producers of solar heating systems in Europe and
account for 75 % of European production. This pales into insig-
nificance, however, compared with the production of such
systems in China. Europe has produced 0.8 million m2 and
China 12 million m2. The main reason for this is that the
Chinese government recognised the importance of solar heating
early on and stimulated the production of these systems with a
variety of measures in its five-year plans.

Despite its inexhaustibility, solar-generated electricity at
2.4.6
present accounts for only a small proportion of our require-
ments. This is because the cost of solar generation is still consid-
erably higher than electricity from gas or coal-fired power

(12) See Appendix I.

2.4.7 Moreover, the generation of electricity using relatively
small units of variable yield (depending on the sun) requires a
different approach to energy than hitherto. The switch to solar
energy is something for the medium term, but it is very impor-
tant that development in the sector be strongly promoted.

is growing
Although the photovoltaic (PV) market
2.4.8
rapidly,
Japan,
there are in fact only three major markets:
Germany and California. These three areas account for 80 % of
global production of solar energy systems. This is encouraged
by high subsidies and by paying households a good price for
electricity generated in this way. Worldwide production of solar
cells
to generating capacity of
1 150 MW. Adding this to the approximately 3 000 MW of
generating capacity already installed at the end of 2003 means
that in 2005 total capacity grew to around 4 500 MW.

in 2004 was

equivalent

2.4.9
The Japanese market was created in 1994 by a
programme of incentives involving 50 % subsidies. The subsidy
was reduced by 5 % each year and 2004 was the last year of the
programme,
in which a 5 % subsidy was available. As the
programme created significant demand, Japanese industry bene-
fited from economies of scale. Prices fell each year by 5 %,
which kept the consumer price stable. Although the subsidy is
no longer available, the market continues to grow at about
20 % annually. This stable demand made it possible for Japanese
companies to invest in R&D and in new manufacturing technol-
ogies. As a result Japan currently accounts for some 53 % of the
world market.

2.4.10
Germany has gone through a similar process, but
about five years behind, beginning in 1999. A combination of
low-interest loans, subsidies and stable prices for the sale of
electricity to the grid resulted in rapid growth of the PV market.
As early as 2001 Germany overtook the USA in terms of
installed capacity. Local producers developed and half European
production (13 % of world production) now comes
from
Germany. The launch of a new support programme in 2004,
with stable purchase prices for electricity guaranteed for the
next 20 years, has given the process a new impetus. The
German market is now the fastest growing in the world, some
40 % in 2004 and 2005. This domestic demand makes it
possible for German manufacturers to develop their production
and to switch production to export markets once the domestic
market begins to be saturated.

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2.4.11
number of points of view.

The development of solar energy is important from a

a. Environmental policy: solar energy is a clean form of energy
without emission of CO2 or other pollutants. Its potential is
enormous,
absorbs
year
3 million exajoules (EJ) of solar energy. In comparison, the
total reserves of fossil fuels is estimated at 300 000 EJ.

every

earth

the

as

A similar development has taken place in Austria,
2.5.5
where regional government subsidies equivalent to 30 % of the
cost of purchasing and installing heat pumps have been avail-
able. Austria now has seven heat pump manufacturers. In both
countries it was the combination of direct financial support,
building regulations and promotional campaigns which ensured
that a heat pump industry could develop which is now able to
operate without support.

b. Social policy: the development of solar energy will create
jobs in designing, improving, producing and installing solar
energy systems. On the other hand, jobs will be lost as less
big centralised power plants will be needed.

2.5.6
from a number of points of view.

The development of geothermal energy is important

c. Regional policy: solar thermal energy can be used in distant,
poor areas where there is no infrastructure for the distribu-
tion of energy. It is a cheap solution for heating and for the
supply of hot water.

a. Environmental policy: geothermal energy is an inexhaustible,
clean and energy saving energy source. Its potential is enor-
mous, as the outer 6 kilometres of the earth's crust stores
energy that amounts up to 50.000 times that of all known
the known oil and gas stocks in the world (14).

2.5 Geother mal energy

2.5.1
Geothermal energy can be used by means of heat
pumps for heating and cooling buildings. These pumps use only
a fraction of the quantity of gas or electricity used by conven-
tional heating/cooling systems. The energy used for heating (or
cooling) is taken from the environment (air, water or earth) (13).

2.5.2
The largest markets for heat pumps are the USA, Japan
and Sweden, which together account for 76 % of total installed
capacity. They are followed by China, France, Germany, Switzer-
land and Austria. The European market has grown from 40 000
units in 1997 to 123 000 units in 2004. The total market grew
by 18 % in 2004. The manufacture and installation of heat
pumps is concentrated in countries where governments offered
strong financial and other incentives.

Sweden is a good example of

2.5.3
this approach. The
Swedish government has encouraged the use of heat pumps
since the 1990s with measures such as direct financial subsidies,
tax breaks and promotional activities. But new legislation applic-
able to the construction sector laying down detailed temperature
requirements for heating systems also contributed to the growth
in the use of heat pumps.

2.5.4
In this way a market was created in Sweden for the
manufacture of heat pumps. The country now has an estab-
lished heat pump industry, with three major players on the
global market and 50 % of European demand. The Swedish heat
pump market is now self-sustaining. The number of heat pumps
in use is growing steadily, even without government support
measures. More than 90 % of new buildings in Sweden are now
equipped with a heat pump.

(13) See Appendix II.

b. Social policy: the development of geothermal energy will
create jobs in designing, improving, producing and installing
geothermal energy systems. On the other hand, jobs will be
lost as less big centralised power plants will be needed.

c. Regional policy: geothermal thermal energy offers people in
distant areas without any infrastructure for the distribution
of energy a cheap solution to provide in their own need of
heating and hot water. Electricity is required in order to
exploit geothermal energy, but significantly less than is
required for direct heating and hot water supply.

3. Raw material efficiency

3.1
It is not only energy from fossil fuels which is finite, but
also reserves of metallic, mineral and biological raw materials
for industrial production (15). There is extensive use of raw mate-
rials in the industrialised world: 20 % of the world's population
consumes more than 80 % of all raw materials.

This consumption pattern is

3.2
incompatible with the
sustainable use of the natural resources available to us. Based on
the assumption that reserves of raw materials are our common
heritage and that current and future access to them is a
universal and inalienable right, Europe will have to reduce its
use of raw materials fourfold by 2050 and tenfold by 2080 (16).
The EESC is satisfied with the initiatives in this field like dema-
terialisation and the Environmental Technology Action Plan
(ETAP).

(14) Source: Informatiecentrum Duurzame Energie.
(15) See EESC opinion entitled Risks and problems associated with the

supply of raw materials to European industry.

(16) Review of the European Sustainable Development Strategy.

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In the final analysis, every product involves damage to
3.3
the environment: whether during production, use or disposal at
the end of its life cycle. The cycle has many phases: the extrac-
tion of raw materials, design, production, assembly, marketing,
distribution, sale, consumption and disposal. At each stage
different players are involved: designers, manufacturers, dealers,
consumers, and so on. An integrated production policy attempts
to improve coordination of these phases (for example by taking
optimum recycling into consideration at the design stage) in
order to enhance the environmental performance of the product
throughout its life cycle.

3.4 With so many different products and players involved, it
is not possible to draw up one uniform measure that solves all
problems. A whole array of policy instruments is required, both
voluntary and binding. These instruments have to be imple-
mented in close cooperation with the public and private sectors
and with civil society.

3.5
Consumer organisations should also play a more stimu-
lating and supporting role than hitherto. Up until now, many of
these organisations have focused mainly on obtaining the best
possible product for the lowest possible price. In practice this
means that production is not achieved in the most sustainable
way.

3.6 Combined heat and power (C HP)

Using the heat produced in the process of generating
3.6.1
in the efficiency of
electricity means a sharp improvement
energy use, despite the technical
limitations arising from the
distance between the place where the heat is produced (indus-
trial environment) and the place where it is consumed (in the
home), which causes a great deal of energy to be lost. Micro-
CHP units can operate primarily to meet thermal needs of a
building with electricity as a by-product. Alternative products
can be configured for electricity demand first with heat as a by-
product. Most sales to date have been heat-led micro-CHP,
although fuel cells are more commonly configured to satisfying
electricity demand.

3.6.2
CHP technology can circumvent this limitation, and at
the same time it offers an economic challenge for European
industry. CHP is mainly used to heat residential housing and
shops and it produces electricity as a by-product. By 2004 some
24 000 units had been installed. CHP can be used with various
energy sources. The most promising of these is hydrogen (fuel
cell) technology, but this technology first needs to be further
developed.

Thanks to subsidies for end users of CHP plant, Japan
3.6.3
has made the most progress in developing this technology,
partly because fuel cell technology is being strongly promoted
there by the automotive industry. The Japanese government
wants Japanese industry to develop a leading position in fuel
cell technology, as it has already done in solar energy. To this
end Japan is promoting and financing research and development
and providing purchase subsidies to end users at an early stage
of market development.

3.6.4
of points of view:

The development of CHP is important from a number

a. Environmental policy: it is a cheap and energy-saving energy
source. On top of that it is very clean, hot water and power
produced with CHP leads to 20 % less emission of CO2.

b. Social policy: the development of CHP will create jobs in
designing, improving, producing and installing CHP systems.
On the other hand, jobs will be lost as less big centralised
power plants will be needed.

4. Implications of sustainability for a range of sectors

The growth of sectors engaged in research and development in
the field of renewable energy technologies shows that there are
considerable economic opportunities in sustainable develop-
ment. These opportunities do not only exist in those sectors
where sustainability technologies are being directly developed
but also in those in which new technologies have to be imple-
mented.

4.1 Transpor t

4.1.1
The transport sector is one of the largest users of fossil
fuels. In this sector there are promising opportunities for the
sustainable use of energy as the numerous useful recommenda-
tions in the CARS 21 final report illustrate (17). In addition,
better planning of urban development and infrastructure and
more intensive use of ICT technology opens up prospects for
improving transport efficiency. Combined with further improved
combustion engine technology, this will
lead to a substantial
energy-saving. In the short term there are also promising oppor-
tunities for switching partially to other fuels, such as natural gas
or fuel from biomass (BTL). In the longer term hydrogen offers
attractive opportunities. The hybrid technology now being
developed is also a promising interim solution.

The maximum potential market share of

from
4.1.2
biomass is estimated at 15 %. The EU has set a target of a 6 %
market share by 2010. An initial pilot project for producing
fuel from biomass on a large scale is already up and running.

fuel

(17) CARS 21 High Level Group: Competitive Automotive Regulatory

System for the 2st century.

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Natural gas produces lower CO2 emissions than either
4.1.3
petrol (-16 %) or diesel (-13 %) and could take a larger market
share given a favourable tax regime. In that way a stable market
could develop for both producers and users. The technology is
already there. The opportunities are particularly great in relation
to urban public transport, as this would enable optimum use to
be made of gas filling stations. A 10 % market share would be
possible by 2020 (18).

4.1.4
Examples in other countries (particularly Brazil) show
that this kind of market share cannot be achieved merely by
ensuring that bio-fuel is available. Flanking policies –such as tax
incentives, targeted legislation and regulation and promotion–
are needed to encourage the consumer to make the switch.

4.1.5
Another side of the coin is that increased use of bio-
fuels originating from environmentally sensitive areas (such as
palm-oil from South-East Asia) may lead to a large scale destruc-
tion of rainforests as these are replaced by palm-oil plantations.
The world knows 23 big ecosystems, 15 of which are exhausted
or heavily polluted according to a recent study by the United
Nations.

4.2 Constr uction

In construction — e.g. housing — there is enormous
4.2.1
potential for more sustainable techniques. It is already possible
to build zero-energy houses at little additional cost, particularly
considering that any additional costs are quickly recovered from
energy savings. Building in this way costs on average 8 % more
than traditional construction methods. Economies of scale could
narrow the gap to 4 % within ten years. Norman Foster, one of
the world's most famous architects, once stated that, if you look
at the total costs of a building over a period of 25 years, the
actual building costs are only 5.5 %. The costs of occupying the
building (energy,
interest
rate on mortgage/lease) account for up to 86 % over that same
period of time. So, while building in a sustainable way may be
slightly more expensive in the short term,
it is considerably
cheaper in the medium to long term.

large- and small-scale maintenance,

4.2.2
In Germany and Austria energy-efficient construction
is growing faster than in the rest of Europe. The Passiv Haus
Institut in Germany has commissioned housing designs which
use very little energy by using solar energy in combination with
efficient, air-tight insulation. More than 4 000 houses of this
type have now been built in Germany and more than 1 000 in
Austria. The principle is also increasingly being used in the
construction of commercial buildings.

The municipality of Freiburg has laid down new rules
4.2.3
on energy-efficient construction. These rules are an integral part

of every lease or purchase agreement which the local authority
enters into with builders and property developers. In this way
the local authority is making optimum use of its legal powers in
order to promote energy management on a large scale. The
agreements state that any construction on land purchased or
leased from the local authority must be done in accordance
with energy-efficiency guidelines; buildings are to be designed to
make maximum use of solar energy and roofs must be suited to
the installation of solar panels. In areas where buildings are
constructed in this way savings of 40 % are achieved on hot
water use.

4.3 Industr y

industrial policy (19). The achievement of

4.3.1
The Committee welcomes the Commission's approach
to industrial policy taking account of sustainability concerns, as
promulgated in its Communication entitled Implementing the
Community Lisbon Programme: A policy framework to
strengthen EU manufacturing — towards a more integrated
approach for
the
Lisbon goals requires a competitive European industry. There-
fore the EESC welcomes the setting-up of a High Level Group
on Competitiveness, Energy and the Environment, one of the
seven major cross-sectoral policy initiatives designed to reinforce
the synergies between different policy areas in the light of
competitiveness considerations. The Committee also welcomes
the efforts made by the European industry itself in this field.

At present,

4.3.2
industry remains largely dependent upon
fossil fuels. However, in numerous instances the choice of elec-
tric process permits the use of all types of primary energy
sources while, in the majority of cases, simultaneously making
for energy savings (20). There are also ways of exchanging resi-
dual energy between industrial complexes and other sectors or
residential complexes. Thus, the residual heat of the Europoort
industrial complex is used to heat
the largest greenhouse
complex in north-western Europe, 20 kilometres away in West-
land.

4.3.3
Crude oil is the basis for the chemicals industry but in
the future less of it will be available. An alternative is biosynth-
esis, the production of basic chemicals from biomass using
bacteria, a very complex but also promising area. In recent years
a great deal of progress has been made in relation to our knowl-
edge of
the genetic make-up of micro-organisms such as
bacteria. New technologies make it possible to modify these
organisms genetically so that they convert the original material
into specific substances. The bacteria become a sort of program-
mable mini-reactor.

(18) Source: COM(2001) 547, Directive 2003/30/EC on the promotion of
the use of biofuels and other renewable fuels for transport, ALTERNA-
TIVE FUELS REPORT OF THE ALTERNATIVE FUELS CONTACT
GROUP DECEMBER 2003.

(19) COM(2005) 474 final, point 4.1.
(20) See Electricity for more efficiency — Electric technologies and their

energy savings potential (July 2004):
http://www.uie.org/library/REPORT_FINAL_July_2004.pdf.

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At present the food and pharmaceuticals industries use
4.3.4
this micro-organism technology, e.g.
in the production of
cheese, beer and penicillin. The opportunities for bioconversion
are considerable in these sectors too, but the chemicals industry
is now also beginning to take an interest in the technology. A
whole series of reaction steps are needed to obtain substances
from crude oil and purify them. The technology needs to be
developed much further but it is theoretically possible to switch
to the direct conversion of biomass into basic chemicals and
other products. This will reduce the need to use oil, with all the
attendant economic and environmental benefits — emissions
reduction, closing of the circuit and management of the chain.

Energy-intensive

in this area. Whereas the steel

4.3.5
sectors may encounter particular
problems in ensuring gradual transition to renewable energy
sources. The level of sustainability of production is a direct func-
tion of the level of technology employed and no major improve-
ments in this domain are to be expected in the near future. The
steel and aluminium sectors in Europe, for instance, are already
performing well
industry is
investing a great deal in new technologies for more sustainable
production, especially through the ULCOS project (Ultra Low
CO2 Steelmaking, the largest European steel project ever) and
expects CO2 emissions to be halved by around 2040,
the
production of primary aluminium in Europe is characterised by
a remarkably high–level use of renewable energy (44.7 %). Since
the energy used in producing secondary aluminium out of
aluminium scrap is only 10 % of the energy needed for the
production of primary aluminium there is a major potential for
energy saving in this sector. However, aluminium scrap in the
European market
is being purchased massively by China
through governmental incentives aimed at saving energy.

The European steel industry also does well in the field
4.3.6
of raw material efficiency and recycling. Half of the world's steel
is produced using scrap metal. Optimum use is also made of
recycled waste. At the Corus plant at IJmuiden 99 % of waste is
re-used either on site or externally.

4.3.7
Although the use of fossil energy sources as a raw
material for industrial production will, to a great extent, be
unavoidable for the foreseeable future, the use of newly devel-
oped materials will help save energy in the applications area, e.
g. by reducing weight in vehicle manufacturing. In order to
promote such innovation the European industry has to preserve
its international competitiveness, beginning with the extractive
industries where the value-creation chain starts.

5. Social aspects

5.1
The need for gradual transition to sustainable production
is unavoidable and undisputed. Deindustrialisation, the transfer
of production to other regions and increasing competition from
and
developing

uncertainty

economies

has

led

to

fear. In this climate people have tended to believe that switching
to more sustainable production will adversely affect Europe's
competitiveness, hinder the growth of industry and destroy jobs,
and that it is bad for the economy and for employment.

have

agreements will

There have been negative effects on employment

in
5.2
Europe. In Germany studies predict that 27 600 jobs will be
lost by 2010 due to the Emissions Trading Scheme (ETS), rising
to 34 300 by 2020 (21). Yet another 6 100 jobs will be lost in
Germany by 2010 as a result of the implementation of the
renewable energy law (22). Finally the implementation of
the
Kyoto-protocol
another
318 000 German jobs by 2010 (23). These figures must be set
against the number of jobs created, which shows that a policy
geared towards climate protection goals really entails ‘industrial
change’: for example, the EUR 16.4 billion for which the renew-
able energies sector in Germany accounted in 2005 and the
170 000 jobs that have so far been created in this sector (24).
the
With production amounting to EUR 55 billion (2004),
in Germany
environment
currently provide
some 1.5 million jobs and contribute
EUR 31 billion to German exports (2003), thus helping to
secure many more jobs (25).

and climate protection sectors

destroyed

5.3
However, the impact is not only negative. A survey of
job losses in Europe shows that less than 5 % of jobs lost have
disappeared as a result of the transfer of production to other
regions (26). In spite of methodological limitations arising from
data collection techniques, this survey remains a useful source
of information, particularly when taken in tandem with other
relevant indicators. It could be argued further that only a small
percentage of that job-loss is due to environmental legislation.

There has also been a growth in jobs. The eco-industry
5.4
engaged in research and development in the field of sustainable
technologies is a dynamic sector which is increasing employ-
ment by 5 % annually. This sector, with more than two million
direct, full-time jobs, now provides as many jobs in Europe as
the pharmaceutical and airspace industries (27).

(21) ‘Zertifikatehandel für CO2-Emissionen auf dem Prüfstand’, 2002, Arbeits-
für Energie- und Systemplanung (AGEP)/Rheinisch-

gemeinschaft
Westfälisches Institut für Wirtschaftsforschung (RWI).

(22) ‘Gesamtwirtschaftliche, sektorale und ökologische Auswirkungen des Erneuer-
bare-Energien-Gesetzes (EEG)’, 2004, Energiewirtschaftliches Institut an
der Universität zu Köln (EWI, Köln), Institut für Energetik und Umwelt
(IE, Leipzig), Rheinisch-Westfälisches Institut für Wirtschaftsforschung
(RWI, Essen).

(23) ‘Das Kyoto-Protokoll und die Folgen für Deutschland 2005’, Institut für
politische Analysen und Strategie (ipas) in cooperation with the Inter-
national Council for Capital Formation (ICCF).

(24) German Environment Ministry press release No 179/06 of 10.7.2006.
(25) German Environment Ministry press release No 81/06 of 20.4.2006.
(26) www.emcc.eurofound.eu.int/erm/.
(27) Hintergrundpapier ‘Umweltschutz und Beschäftigung’ Umweltbunde-

samt, April 2004.

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An OECD study (28) has shown that sustainable produc-
5.5
tion does not by definition lead to higher costs. In the long-
term it can even reduce costs to some extent. Moreover, sustain-
able output can be counterbalanced against these costs. Clear
commercial advantages, environmental legislation and ancillary
regulation lead to investment in sustainable innovation, encou-
rage more efficient use of raw materials, strengthen brands,
improve the image of businesses and ultimately lead to greater
profitability and employment.
In order to be successful this
process needs a common approach based on shared responsi-
bility from business, labour and government.

5.6
To be avoided at all costs is that European industry
suffers a significant competitive disadvantage when compared to
regions outside the EU due to higher costs resulting from envir-
laws and regulations. When Europe sets
onmental and social
standards for sustainable production for its own industry it is
unacceptable and beyond reason if, at the same time, it allows
producers from outside the region to bring products to the
market that are not produced in compliance with those stan-
dards. To stimulate sustainable production a two-pronged
approach is needed: internally to the EU on the one hand and
externally to the EU on the other.

5.6.1
Regarding the former, appropriate instruments should
be introduced to ensure that social and environmental costs
resulting from non-sustainable production methods within the
European Union be internalised in the price of the goods to
promote the main thrust of the report of the World Commis-
sion on the Social Dimension of Globalisation for policy coher-
ence among the ILO, WTO, IMF and World Bank, as pointed
out in the EESC opinion on ‘The Social Dimension of Globalisa-
tion’.

In terms of the latter, the EU should make every effort
5.6.2
in relevant international fora (in particular WTO) to include
non trade concerns such as fundamental social and environ-
mental standards into international agreements on trade to facil-
the sustainability policies of Europe's
itate the upgrading of
India and
competitors. Countries such as the United States,

Brussels, 14 September 2006.

China have an unfair economical advantage compared to
Europe as long as they are not bound by the Kyoto protocol's
CO2 reduction targets. Those agreements should be imple-
mented on a global scale as trade can only be really free when it
is also fair.

5.7
The European eco-industry now has roughly a third of
the world market and generates a trade surplus of more than
EUR 600 million. In 2004 exports grew by 8 %, and this is a
growth market because in the future all countries, even China
and India, will increasingly switch to sustainable products and
production processes.

The sustainable,

5.8
innovative society towards which we
have to move needs a thorough information campaign aimed at
citizens and consumers to raise awareness and to provide a
broad social basis. It also needs well-trained workers. In the
recent past, Europe paid too little attention to this. The English
text of ten European directives in this area (sustainability, inno-
vation) has been scanned for the words ‘training’, ‘learning’, ‘skil-
ling’ and ‘education’, and only the first of these occurred, once,
in one directive.

5.9
A number of Commission communications which
length with the need for
preceded these directives dealt at
training. That interest was entirely missing in the directives,
however. Communications are just words, whereas directives are
deeds. A policy is not what you say, it is what you do. The EESC
welcomes the fact that a lot of attention is paid to the impor-
tance of education in the new EU industrial policy and
encourages the Commission to continue in the same vein.

5.10
In the Lisbon Strategy Europe has set itself the objective
of becoming by 2010 the most competitive knowledge-based
economy in the world with more and better jobs and greater
social cohesion. A well-trained workforce is needed to build and
maintain this kind of society. If we do not invest enough in
training our workers, not only will we not achieve the Lisbon
objectives by 2010. We will never achieve them.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(28) www.oecd.org/dataoecd/34/39/35042829.