G20 Foundation Research Green Growth Forum Communique | Page 70

Towards an integrated approach to promoting environmental innovation and national competitiveness Rainer Quitzow Forschungszentrum für Umweltpolitik, FU Berlin Introduction The link to national competitiveness 68 G lobal competition in the growing fi eld of environmentally-friendly technologies has increased markedly over the past years. Until recently, discussion about the role of environmental technologies centred on their long term social benefi ts. Today, however, debates are increasingly focused on the role of green markets for economic development and on ensuring national competitiveness. Questions are being raised on who will benefi t economically from the green markets of the future and how to ensure that national industries are able to position themselves as global leaders in this growing technology fi eld. Who will be the sponsor of the break-through technologies that will replace existing resource-intensive paradigms? Which national markets will lead the glo- bal trend towards a greening of the economy? These questions are not new, but they are increasingly moving to the centre of nati- onal policy debates. An important milestone in this debate was the formulation of the so-called Porter Hypothesis, in which Porter and van Linde (1995) made the controversial proposition that strict environmental policy must not necessarily place a drag on national competitiveness. Rather they suggested that an ambitious environmental policy may in fact be a catalyst for a virtuous cycle of innovation, leading to reductions of environmen- tal emissions as well as costs. In this paper we take this proposition as our starting point, reviewing the evidence that has been presented to date on this question. We conclude, however, that these studies only scratch the tip of the ice berg. The debate no longer cen- tres on whether environmental policy is or is not benefi cial to national competitiveness. Rather the question is how to design policies that promote competitive green industries. To be able to explore what drives national competitiveness, we fi rst need to establish what is meant by the term. According to Cantwell, competitiveness refers to »the posses- sion of capabilities needed for sustained economic growth in an internationally competi- tive selection environment, in which environment there are others (countries, clusters or individual fi rms, depending on the level of analysis) that have an equivalent but diff erent set of capabilities of their own« (Cantwell, 2005, p. 544). The European Commission de- fi nes it »as the ability of its industrial sector to maintain and strengthen its competitive position in the world market relative to that of other countries, focusing on price and cost developments of production and other parameters potentially aff ecting the growth per- formance, market shares, and investment and location decisions of fi rms in the industrial sector.« (European Commission, 2010, p. 11). Both defi nitions relate competitiveness to the ability or the capabilities of fi rms or entire industrial secto rs to successfully compe- te on the international market and drive economic development in the countries they operate in. When applied to the national level, what matters are not the capabilities of an individual fi rm to remain competitive but the framework conditions (i.e. national level capabilities or »parameters«) that facilitate the process of developing and maintaining