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|28 Jun 2012|
Forget Rio, a green boom is looming
Despite the recent failure of Rio +20 to lock in meaningful environmental commitments, global demand for sustainable products is warming up for a boom.
Over the past decade we have seen a surge in demand for renewable energy products such as wind and solar. The solar PV industry is experiencing annual growth of 47 per cent globally, while installed capacity in the more established wind industry has expanded at an average rate of 23 per cent over the past five years.
Other sectors are set to follow. Green products, ranging from household goods, like washing detergent and organic food, to large items like electric scooters and cars are already racing off the shelves.
The introduction of the carbon price next month will drive demand for green goods up even further. Carbon credits, generated by activities ranging from protecting forests, to cleaning up manufacturing processes, to upgrading building lighting, directly and indirectly drive greater demand for green products.
The gradual introduction of stronger environmental protections globally, shifting consumer demand, and the rising impacts of global warming will fuel further increases.
It follows that what we are seeing today is just the start of a long-term increase in green demand.
While the argument surrounding the economics of sustainability has typically focussed on the costs to business, the reality is that large profit opportunities are emerging. The business intelligence unit of the UK’s Department for Innovation, Business and Skills estimates that the market for low carbon goods and services already exceeds £3 trillion per annum.
Australia in particular is ideally situated to benefit from this boom by gearing our economy to meet the supply side of the equation.
Our strong education system and entrepreneurial spirit creates individuals with the know-how and creative ingenuity to develop successful green products. We have an established manufacturing base that is crying out to produce more, and our major ports provide ready access to the world’s booming markets and key shipping lanes across the Asia Pacific.
Our landscape has also given our industries a natural edge in developing sustainable products. Grappling with the harsh Australian climate has forced many local companies to innovate and develop low impact environmentally friendly products – products the world increasingly needs.
Take Caroma, the local sanitary ware producer. Water scarcity led it to develop the world’s first dual flush toilet, an invention which revolutionised the industry. Demand for its products skyrocketed and allowed the company to expand and dominate the market. Caroma now exports its products to the world and employs hundreds of workers at its Australian factories.
We can replicate sustainable innovation like this across our industry types and give Australian companies an edge in the new global economy. But we need smart policy settings to support this development.
The carbon price is a good first step. It will spur further innovation, particularly in the energy sector, and increase local demand for products that generate carbon credits. While a good start, however, it’s not enough.
The demand seen today is the tip of the iceberg. Global needs and tighter environmental policies are converging to create a green boom, one that will make the tech boom pale in comparison. We need to prepare our economy to capitalise on these changes and make sure we don’t miss this boom too.
To take advantage of this historic opportunity Australia needs to lead the world in developing the smartest sustainable industries. We’ve already missed some opportunities. Four of the five biggest solar manufacturers in the world are run by Australians, but none are based locally. Clearly we have the smarts to lead, but something needs to change to support the local development of these companies.
There are a few ways this can be done.
In the 1970s, Taiwan invested heavily in specialist high tech campuses in preparation for the coming tech boom. The investment gave local companies an important lead in the tech race. Taiwanese companies today maintain their reputation for producing some of the world’s most advanced technologies, whether it’s the fastest computer chips or the most efficient semi-conductors, while companies such as HTC, Acer and BenQ export cutting edge computers and ‘smart’ devices to the world.
The economic benefits from Taiwan’s investment have been immense. In April this year alone, Taiwan exported more than $US7 billion worth of electronics. Australia could adopt a similar strategy and invest in sustainable technology campuses to give our home grown industries a head start.
Germany provides another model for Australia. Its export oriented economy centred on mechanical engineering and chemical production is supported by aligned state and national policies – an approach which has particularly effective because it supports small and medium enterprises, not just major brands like Siemens, BMW and Bayer. This encourages innovative and nimble start-ups to get a toe hold in the market and prevents established companies becoming complacent.
Crucially, this approach is supported by the national business lobby. Germany’s model has enabled its industries to excel, produce goods of exceptional quality, and make ‘Made in Germany’ a label of global repute.
Ultimately, the best model for Australia may be a combined approach, marked by investment in green tech campuses and the development of an international reputation for excellence in green design and manufacture. It would make the ‘Made in Australia’ brand synonymous with the world class sustainable products, capitalise on the coming boom and lock in decades of future prosperity.
To take this new direction Australia needs strong leadership from our politicians and our business community. We need a policy framework that supports start-ups in the sustainability sector and encourages existing companies to green their business. Business leaders also need to support enhanced environmental controls, which will spur green innovation, rather than campaigning for the status quo. Only then will we have a chance of tapping into the big dollars to be made from the coming green boom.
No country currently leads in the sustainable business sector although many are rapidly advancing. Australia has the chance to take hold of this immense opportunity, build its reputation in this area, future proof the economy and make Made in Australia a world class sustainable brand.
Tom Quinn is a sustainable business analyst. He has spent the last five years working with both the public and private sector to develop the business case for sustainable economic growth.
Source: Climate Spectator