THE ESDS AND THE NEED FOR A ‘SMART GROWTH’ STRATEGY

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

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

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

4. THE RETREAT OF ARCTIC ICE SEPTEMBER 2005 SEPTEMBER 1979

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

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

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

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

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

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

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

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