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Janez Potočnik

European Commissioner for Environment

"Without public action, some resources will never have a price nor a market"

Conference of Confederation of British Industry and the Green Alliance

London, 12 December 2011

I would like to thank the Green Alliance and the Confederation of British Industry for inviting me to speak here today.

I will briefly speak about the resources situation that Europe face, and why it merits attention. Then, I would like to discuss European action to promote resource efficiency, and the importance of adopting a common approach.

Why are resources important right now?

First of all, rising resource prices and more volatile resource prices are creating problems for business. They are making investment decisions tougher, access to resources more difficult, and the prospects for growth poorer. 87 % of European Companies expect the costs of their material inputs to increase over the next 5 to 10 years.

Looking beyond Europe, our position in a resource constrained world does not look good. More than half of the resources that we currently use are imported. Import dependency is increasing. And the impact on land, water and biodiversity in the developing world is also increasing.

And all predictions confirm that resource demand will continue growing. The world's population will be more than 9 billion by 2050. By 2030, there will be already 3 billion more ‘middle class’ consumers in the global economy, as living standards improve in China and India.

Finally, there are environmental risks. Some environmental impacts are nearing 'tipping points', where damage to our natural capital and biodiversity may become irreversible.

So, I can understand businesses when they tell me that the resource situation is not sustainable. There is no prospect of sustainable growth unless we become more resource-efficient. That is why I say that resource efficiency is a competitiveness issue as well as an environmental one.

Let me move now to our response

This autumn the Commission adopted its "Roadmap to a resource-efficient Europe" as part of its Europe 2020 growth strategy. You could ask yourselves why we need action from the public sector. Rising resource prices should make industry invest in more resource efficiency. Many businesses are already doing so, very successfully. Why is this not enough?

There are three reasons I would like to outline to you today.

The first is that prices frequently do not reflect the true costs of resource use. They certainly do not reflect the costs over the life-cycle of products. That is one reason why we have so much waste in our economies. Every year in Europe, we use 16 tonnes of materials per person per year to keep our economy going; and we produce 6 tonnes per person per year of waste; with half of that going into landfill. This is not sustainable. It's more of a linear economy than a circular economy. We can help companies do something about it. Two things in particular: design; and finance.

On design, we could help promote eco-design and labelling within the European economy. If every company could afford to carry out a proper life-cycle costing of its operations and products, and consumers were properly informed, then waste could be prevented, products recycled and re-used. Many companies are already doing this, but there are many different standards across the European economy. A common approach across the EU would help break down these barriers and open up more opportunities for a truly European Single Market for green products. Public authorities could help by making their procurement decisions sustainable across the life-cycle.

But this can be expensive, especially for small firms. Access to finance for innovative small firms is a barrier to growth. The venture capital market in the EU is one-tenth of the size of that of the US. The measures promoted by Vince Cable here in the UK are being supported at European level. The European Commission proposed, in our Annual Growth Survey for 2012, to break down the barriers in the EU market for venture capital firms. This is vital if we want to get the growth in the market for eco-friendly products that consumers want.

The second reason why we need action on resource efficiency is that some resources have no price, no market, and never will have without public action. This is particularly true of our natural capital – our ecosystems and biodiversity – on which so much depends, not least our food production. Some seem to find it fashionable to claim that protecting nature goes against growth, and that it is too expensive in an economic crisis. My response is this – tell that to people and businesses who have been ruined by floods because of planning decisions taken without assessing environmental impacts! If we had invested € 200 million some years ago in restoring wetlands along the Danube, then the 2005 floods that cost € 400 million in damage could have been prevented. But there is no market in ecosystem services. That is why our project to value ecosystems properly – on which we appreciate UK support – is vital for our current prosperity and our future growth.

The final reason is that the true costs of resource use are being distorted by our tax system and subsidies for environmentally harmful activities. The OECD has highlighted the subsidies to fossil fuels which run into tens of billions each year in Europe alone. It is a mystery to many people that we are prepared to sacrifice scarce public resources at a time of budget austerity in order to do damage to our environment. Just one small example is tax breaks for company cars – these cost € 50 billion a year, and increase our greenhouse gas emissions at the same time! You could also ask why we are taxing employment so heavily when we have 12 million unemployed and resources so lightly when we have environmental problems. So getting the prices right means also getting taxes and subsidies right. That means a shift away from taxing employment and on to resource use. This is one of the messages that we will bring into the European Semester of economic policy coordination next year.

You will find these three themes set out in our Roadmap to a more resource efficient Europe, on which we are seeking the support of businesses, governments and Parliaments.

Let me conclude on an optimistic note. Businesses are already showing that growth through resource efficiency can be profitable. Many already understand that this is a competitiveness issue, an issue for survival in the long term. I hope to have shown that we need to have concerted action throughout Europe if we are to take full advantage of the opportunities that resource efficiency can bring. The UK government has published work showing the immediate gains to UK businesses from resource efficiency. The latest work of McKinsey on the Resource Revolution sets out the gains that we could achieve at a global level by 2030: $ 2.9 trillion dollars on resource productivity alone. Our own work shows that a one percentage point gain in resource productivity can save € 23 billion a year to European businesses, and could help them create 150,000 jobs.

We have to create the framework conditions and give the political messages that will enable business, particularly smaller businesses, to meet these challenges and deliver these gains.

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