Monday, July 25, 2011



Last week, I came across a profound piece of research from the USA that demonstrates not only the potential of the so-called green economy, but also suggests how government can help develop this sector over time.

Called “Sizing the Green Economy” and written by researchers from the Washington-based Brookings Institution, the report claims to be the first comprehensive study of green industries and its impact on the US economy.

A video from the launch of the report is shown below

In the report, the “green” economy (otherwise known as “clean” or low-carbon) is defined as those industries that produce goods and services with an environmental benefit. These include not only energy developments such as wind farms and solar parks but also green developments in industries such as food and appliance manufacturing, sewage treatment or recycling and a whole range of environmental goods and services.

The first major finding from the study is that the so-called “clean economy” employs around 2.7 million people in the USA, which is actually more than those employed in either biosciences or, more relevantly, the fossil fuel industry. It also found that the clean economy is both manufacturing and export intensive, with 26 per cent of all green jobs to be found in manufacturing businesses (such as electric vehicles, chemical products and lighting), which is three times the rate for the entire US economy.

In addition, the green economy exports twice as much per employee, led by industries such as biofuels and green chemicals. Therefore, the growing importance of the green industry sector cannot be overstated and this is reflected in the funding being provided for the sector. For example, around $1 trillion of investment capital was pumped into into clean energy sectors alone between 2004 and 2010.

The green labour force commands wages that are 13 per cent higher than the median for the US economy although a higher proportion of jobs within the industry are taken up by less skilled workers, That is an important finding for policymakers – that unlike many high technology industries, the sector can have a direct impact across the entire workforce and not just those with high skills.

In terms of location, two thirds of current green jobs are to be found in metropolitan areas, a result which has implications for the development of industries here in the UK. Indeed, the study found that job creation was boosted by the existence of specific green ‘clusters’ made up of businesses in similar or related industries, usually in urban areas. These included, for example, professional environmental services in Houston, the solar photovoltaic sector in Los Angeles and fuel cells in Boston.

Unfortunately, with the exception of the Isle of Wight’s previous cluster in wind farm technology, there are no similar concentrations of companies in any green sector in the UK. In Wales, the development of Anglesey as the ‘energy island’ is, unfortunately, a concept that remains on the drawing board.

The report’s conclusions has considerable implications for policymakers and there are certainly lessons for the British and devolved governments to encourage a more vibrant green economy on this side of the Atlantic.

First of all, the green economy could be encouraged if the public sector could develop measures to encourage greater domestic demand for low-carbon and environmentally-oriented goods and services. These could include a greener approach to procurement by the public sector, which could use its purchasing power to encourage the development of new practices by private companies.

Government could also adopt innovative financing solutions to reduce the upfront costs of investing in clean technologies, which is why the UK Coalition Government’s plans for the world’s first state-backed green investment bank cannot come quickly enough.

There also needs to be a greater focus on developing innovation across the green economy, by focusing on providing funds to encourage and support energy and environmental research projects, especially as there is growing demand from industry for expertise in this area. For example, a recent survey by Ernst & Young found that 75 per cent of major global corporations will increase their “cleantech” expenditure over the next three years, with 40 per cent of that spending going into research and development (R and D).

In Wales, the development of the Low Carbon Research Institute (LCRI) led by Cardiff University, is definitely a step in the right direction to link up academic expertise with emerging green industries. However, given the final conclusion of the report, namely a focus on regions to drive the clean industry agenda, I would propose that the UK Government needs to consider more R and D investment into regional projects such as the LCRI as exemplars of good practice for the whole of the country.

The research undertaken by the Brookings Institution should certainly be replicated here in the UK so that we have a full picture of the potential of the green economy for the future prosperity of the nation. It would not only ensure that policymakers are not operating in a vacuum, but demonstrate that government, academia and industry can work together in an efficient and effective manner to make the most of the opportunities that will arise in this sector during the next decade.