Structure and Function of the Environmental Industry : The Hidden Contribution to Sustainable Growth in Europe

The paper shows the results of a study, which the Environmental Policy Research Centre conducted in the context of the international research project: "Resource productivity, environmental tax reform and sustainable growth in Europe" (PETRE).1 PETRE is part of the Anglo-German Foundation research policy initiative: Creating sustainable growth in Europe. The study focuses on the "eco-industry", their function, structure and dynamics in Germany and for Europe. It describes two faces of environmental industry: a more traditional part of end-of-pipe treatment or "pollution management" and the newer, fast growing part of eco-efficiency or "resource management". The study gives a general explanation to this rapid growth. For many reasons ecoefficient innovation is a necessary condition for sustainable industrial growth. The authors come to the conclusion that this industry so far has been underestimated - not least because its dynamic creates big problems as regards statistical definitions. To a large extent this is an "invisible industry". In a second step ban explorative analysis of the German environmental industry - the most advanced case in Europe - is done. Four selected parts of the environmental industry are analysed together with the related policies and instruments: Green power, eco construction (low energy buildings), fuel-efficient diesel cars and industrial recycling. The description of co-benefits includes higher employment, innovation and successful export. The explorative study shows the high importance of economic instruments in combination with regulation. The price increase of energy and raw materials plausibly has been important too. However, it cannot explain the specifics of the German success case