Brussels, 15 March 2002

REPORT FROM THE COMMISSION Environmental technology for sustainable development

EXECUTIVE SUMMARY

At the European Council in Lisbon in March 2000, the European Union set itself the objective of becoming "the most competitive and dynamic knowledge-based economy in the world". At the G?teborg European Council in June 2001, a strategy for sustainable development was agreed, by adding an environmental dimension to the Lisbon Strategy. Environmental technologies are an important bridge between the Lisbon strategy and sustainable development, having the potential to contribute to growth while at the same time improving the environment and protecting natural resources.

New and innovative environmental technologies can add to economic growth in a number of ways. Provided they reduce the costs of environmental protection, they allow us to get more environmental protection for less money, or to meet current standards at a lower cost. This frees up resources for use elsewhere in the economy. They also help to decouple environmental pollution and resource use from economic growth, allowing our economies more scope to grow in the long run while still remaining within our environment's limits. This is central to sustainable development.

Finally, an innovative environmental technology sector can help underpin growth if it is capable of tapping into rapidly growing export markets. Trade in advanced technologies can be good both for the EU, as well as other countries that need such technology to help them tackle their own environmental problems. By developing better and more cost-effective technologies we open up a wider range of options to countries that face the same environmental constraints that we do

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It is clear that when we talk about environmental technologies we mean far more than `end-of-pipe' devices to clean up pollution. Environmental technologies include `integrated' technologies that prevent pollutants being generated during the production process, as well as new materials, energy and resource-efficient production processes, environmental know-how, and new ways of working. In short, we should take a broad view of environmental technologies, as from a policy perspective our concern should be the use and potential of environmental technologies throughout the economic system

The recognition in the Lisbon Strategy that we need to renew our capital stock to improve our economic performance therefore gives us an opportunity to invest in an economy that is both more competitive and capable of supporting sustainable development. In particular, the enlargement of the EU and the investments needed to comply with the environmental acquis provide a great opportunity for the EU15 and the Candidate Countries to increase their uptake of environmental technologies and contribute to sustainable development.

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Environmental technologies are already a growing industry. Rising demand for a better environment has led to an expanding supply of environmentally friendly techniques, products and services in both the industrialised and the developing countries. However, we do not have data that captures the whole range of innovative technologies in use. The data we have only captures a narrow range of environmental technologies, and includes only those that are driven purely by environmental protection requirements. Nevertheless, the data we do have show this is a diverse and dynamic sector that is well placed to perform in this growing market

Community policies already promote new environmental technologies in a variety of ways.

But much of the potential of environmental technologies is unrealised because of market and institutional barriers that hinder their use. In particular, market prices often do not reflect the

full value of environmental resources, which means that markets do not provide the right signals to investors. This leads to systematic under-investment in innovative technologies by both firms and households.

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Removing market obstacles and "getting prices right" by internalising environmental costs in market prices is therefore crucial if we are to exploit the potential of environmental technologies to the full, and to provide incentives for further research and development in this field. Other institutional obstacles such as information gaps and capital market constraints also matter. Innovative activity also depends greatly on how regulatory and other policy instruments are designed, putting a premium on improving the quality of regulation and governance

By developing and bringing to the market new environmental technologies, the EU can contribute to sustainable growth both domestically and worldwide. The Commission therefore intends to develop an Action Plan to address the barriers that hinder the wider diffusion of environmental technologies and to promote their development and use.

Brussels, 13.03.2002 COM(2002) 122 final