The Critics Say: 
After issuing the directive, José Manuel Barroso, the European Commission President certainly took a lot of heat from the press, from other economic pundits and from member countries who felt the directive was too burdensome.  For one, the critics say the plan is very aggressive and will cause pretty serious strain on the economies of some of the more powerful countries in the EU including the UK. Barroso projected the cost of the proposals across all 27 member states would be €60 billion ($90 billion) a year, or 0.5 percent of gross domestic product of the EU.  For the UK alone, it is estimated it would cost €6.3 billion to comply with the directive.

A second, and perhaps bigger problem that the critics point out is that the EU directive may be out of step with the US and other countries.  This new directive could potentially result in member countries losing their competitive edge in the global market place because it still costs more to produce carbon efficient (or sustainable) goods.  This in turn would cause member countries to charge a carbon tax to foreign countries like the US and China to import cheaper non-environmentally friendly goods into the EU.  The subject of this has already come up in other forums between the US and the EU and tensions are on the rise.

A third challenge to this Directive is that it doesn't treat all member countries as equal and it allows some to hide while others take on the brunt of the challenge.  For example Germany, who is currently at 12% renewable electricity production is committing to get to a whopping 40% by 2020 and Sweden has committed to 49% (down from an original commitment of 55%).  Meanwhile, the US's close partner, the UK only produces 2% of its energy through renewable resources and has only committed itself to 15% and is complaining all of the way. Other countries like Italy and Belgium are also at a low 2% and many critics are concerned that if the UK is having trouble imagining how its economy can absorb the green hit, then how can the struggling economies of smaller nations have a chance?

The Proponents Say:
However, there is potentially some good within this Directive.  For one, the proponents say that it is simply the next step in a post-Kyoto world and that it will apply some pressure for the US, China and Russia to get in step with the EU - potentially another sign that the EU is leading the way in the new green economy and not the US. 

In fact a representative from the Carbon Trust has basically drawn a line in the sand claiming the EU's leadership "This powerful package of measures has put Europe firmly in the driving seat of international action on climate change and has quite rightly raised the bar on the UK’s renewable energy ambitions. The measures announced for the next phase of the EU ETS are very welcome as they will increase and firm up the price of carbon - essential if we are to drive investment in low carbon technologies at the scale required to deliver the deep carbon cuts necessary to mitigate the impact of climate change.

Proponents also claim that it is also a good thing because the studies that helped to support this new directive give more evidence to the cost of not acting.  Mr. Barroso said that the studies have shown that if the EU does not act now the cost “could even approach 20 per cent of GDP” so the project 0.5 percent of GDP looks small in comparison.

The success or failure of this Directive is going to be a big indicator of who the power players are in the green economy.  If it fails, it means the US, China and India have applied the pressure to slow down the EU's pace.  If the EU wins, then it could mean they will be responsible for pushing the US, China and India to play catch up.  Although its way too early to tell whether or not the Directive will be successful it does have a fair amount of support.  Renewable Energy Access reports that "European industry groups including the European Renewable Energy Council (EREC), the European Wind Energy Association (EWEA), the European Solar Thermal Industry Federation (ESTIF), the European Photovoltaic Industry Association (EPIA) and the British Wind Energy Association (BWEA) have all issued statements supporting the directive."

What I Say: 
The world does does not generally do anything simply because it is good or because it is the right thing to do.  To get momentum you need the combination of the will of the people, the government and perhaps most importantly the will of corporations who'se primary goal is to make money.  If you loose any one of the three, you loose.  Show me anyone who claims otherwise and I will show you a looser.

So where does the EU's Directive fit into my analysis?  Well, it has very powerful support from a few member countries (like Germany and it used to be from Sweden), hesitancy from a few powerful member countries (like the UK) and a whole lot of wait and see attitude from the rest.  In terms of the people... well what is the will of the EU?  Are they one people or many?  I would qualify the EU as a fairly fragmented population that has slightly more hope of organizing itself than the US' population.  So how about corporations?  Well there are winners and there are loosers in this Directive.  So who are the winners? My wild guess is that it's the new school companies trying to create a new green economy.  So who are the loosers?  Again my wild guess is all of the old guard companies that fell asleep at the wheel while a whole new economy got proposed inside the EU.

Ok.  Enough analysis.  So where do I stand?  I think that the Directive is a good thing that will help push the tipping points in government, society and in corporations.  However, I don't believe it will be the thing that creates a new green economy.  To do that I truly believe you have to get the old guard companies and the old guard governments on board because that's where most of the power exists.  I don't believe they are against the directives because they are evil.  I believe its because they aren't prepared for change and they are scared to death that it will effect their bottom line, or worse knock them out of power.  In the end, the most likely situation is one or two new entrants per market will rise up and the old guard companies will change.  Those who don't will loose, because I do think that the new green economy is inevitable regardless of whether or not it has anything do to with saving our climate or solving the sustainability challenge.

Someone has hit the GO button on the green economy and you just can't undo that.  Just remember, just because someone hit the button, it doesn't say anything about how long it will take to get out of first gear. 

How this story is connected: 
This Directive is something that I will be keeping my eye one and is likely going to be part of a larger feature story that I am working on called "It's the Infrastructure Stupid"

That's all for now. 

Steve Newcomb
"I wasn't born Green, but I got there as fast as I could ... once I realized it was profitable"

Posted by Steve Newcomb on January 28, 2008 11:02 AM | Permalink