Going counter to the generally accepted idea that economic growth must go hand in hand with increased carbon emissions, Euler Hermes has identified four promising sectors where the green economy offers medium and long-term growth prospects to companies that are prepared to invest in new technology and rethink their mainly costs-based strategies.
Production of green energy is too small to halt the rise in carbon gas emissions
Energy production – still based mainly on fossil fuels (67% of production) – currently accounts for 22% of total carbon emissions and consequently of greenhouse gases. With demand for energy growing steadily under the combined effects of population growth and improving living standards, the situation is distressing: carbon gas emissions are set to double between 2000 and 2030, pushed up in particular by development in emerging economies. Despite growing international awareness and efforts to limit the impact of and reduce greenhouse gas emissions (1992 United Nations Framework Convention on Climate Change and 1997 Kyoto Protocol), Euler Hermes notes that with regard to energy production the solutions are still at an embryonic stage. Renewable energy production is growing slowly and with difficulty, with bio fuels accounting for just 3% of total energy production in 2010, wind 1% and photovoltaic 0.2%, while nuclear energy’s share has stabilised at 14%.
Targeting sectors with high carbon gas emissions
To reduce carbon gas emissions, not just in the area of energy production, there is an urgent need to reduce the energy consumed by the production of goods and services, particularly in sectors with high carbon gas emissions. This is the case of construction and utilisation of buildings, which are currently responsible for 30% of world carbon gas emissions. “We foresee a steady rise in carbon gas emissions linked to fast-growing urbanisation”, says Euler Hermes’ Chief Economist Ludovic Subran. “Nevertheless, this sector holds out real prospects for the green economy, in the outset when designing construction materials and during building renovation, through better insulation for example. The amounts involved are significant. We estimate the additional economic potential at close to €20 billion a year over the next 20 years. Construction companies could take advantage of an opportunity to diversify and develop their businesses while consumers would benefit from lower energy bills.” In Europe, it currently takes 10 years to amortise the added construction costs of an HEQ*.
There are also attractive prospects in the transport sector, which is responsible for around 20% of all carbon gas emissions (18% for road transport and 2% for air transport) and whose margins depend strongly on the cost of energy. New emission-reduction technology does exist, such as hybrid engines in the car industry, but these are still expensive. “In the long term, both manufacturers and consumers will benefit as the cost of running a car will drop. The potential is all the greater in that the number of cars on the road is expected to more than double by 2030,” says Yann Lacroix, head of sector research at Euler Hermes.
Two industrial sectors, cement and chemicals, have particularly strong potential for green growth. Together they account for 12% of carbon gas emissions, a level that is decreasing slowly but steadily. Driven by production costs that were becoming unsustainable, cement companies have over the past twenty years developed production processes that consume less energy and achieve improved performances. Chemicals producers are also seeking to reduce their carbon footprint (5% of world carbon gas emissions). The European chemicals industry has already made substantial efforts and these have paid off.