Greening America

‘Environmental policies must be carefully structured and predictable if they are to enhance rather than undermine competitiveness.’

So begins an article in the current edition of Harvard Business Review, ‘Green Rules to Drive Innovation’ by Daniel Esty and Steve Charnovitz. To paraphrase the article, they write about energy and climate policy from a viewpoint that this has to be done so let’s do it right. Looking across the pond from Europe, companies in Europe should be concerned. Europe is well advanced in putting a cost against carbon dioxide emissions, considerable investment is flowing into the low-carbon economy and there is growing confidence that making the early moves in green technology will pay off handsomely. But what if America, the slumbering giant so far resisting calls for action on climate change, wakes up to the opportunities? The ability of America to reinvent itself and steal a march on Europe is a very real threat to European companies.

In the article it is argued that without a coherent framework for pricing greenhouse gas emissions, American companies have been unable to make rational decisions about investments. Spending on factories, equipment, and product design where there are significant energy implications becomes fraught with difficulty. ‘This uncertainty has cast a pall over the entire U.S. economy... dampened innovation and put U.S. companies at a serious disadvantage.’ The authors argue that U.S. business is put at a disadvantage compared with businesses in countries where clear policies have sharpened the corporate focus on waste and inefficiency and spurred innovation.

If America enters the international competition for green and renewable technologies, it would be a game changer. The nation that put a man on the moon could turbo-charge green innovation. For example in aviation, U.S. companies have the technology to launch the next Golden Age of aviation, but there is little sign that the U.S. government will allow it. The necessary action includes putting a price on carbon and tax on aviation fuel, but such proposals are greeted with deep suspicion in America. With a presidential election looming, politicians will not be campaigning for increasing the cost of carbon dioxide emissions.

At the time of writing, the HBR article on green innovation does not appear to have grabbed the attention of U.S. business leaders, not appearing on the list of the most popular articles on HBR.com. Perhaps European business can rest easy that competition from the United States will not be mobilized anytime soon. That would be wrong; the United States has the capability to catch up, over take and forge ahead.

For the sake of the planet I would like to see a race for who can lead in green technology. However it is not a two-horse race; both the United States and Europe should be concerned that China could take the lead. For those who think green innovation is a waste of money; think again, the new economy will depend on it.