Green sells, and investment in green technologies can offer both environmental and economic gains. But as politicians and businesses appear enamoured of the concept of a green agenda, are expectations of the results realistic?

If Gordon Gekko – the iconic, money-loving character from the film Wall Street – were a real-life character and ever decided to run for political office, he would invariably change his famous ‘greed is good’ slogan to ‘green is good’.

In theory, decreasing pollution, preserving resources and minimising environmental damage is good. But embracing green ideals is also good for politicians, since showing concern about the environment combined with declarations about creating large pools of clean-tech jobs sells. And it can bring big bucks as well: according to the International Energy Agency, $13,500bn must be invested in green energy by 2035 to cut down carbon dioxide emissions.

But the rush for green gold may also lead to the misappropriation of funds. And during times of economic distress, the need to make the most of scarce public money is certainly as pressing as the necessity to protect the environment.

According to the fDi Global Outlook Report 2010, capital earmarked globally in alternative and renewable energy inward investment projects was at $40.64bn. Although this capital expenditure dropped significantly, by 49% as compared with 2009, it was still significantly higher than sectors such as financial services ($20.22bn), transportation ($19.34bn) or software and IT services ($13.72 bn). At the same time, alternative and renewable sector projects did not make it into the top 15 ranking of the biggest jobs creators.

Dr Janet L Asherson, environment, health and safety expert at the International Organisation of Employers, says that green jobs “tend to be equated with scientific and technical developments and skills, which would intuitively move toward less labour intensity”. At the same time, as Ms Asherson points out, since technical skills will be in bigger demand, especially in developing countries, this leads to wage increases for highly skilled workers. Ms Asherson, however, adds that she does not see, at least in the short term, a clear link between green jobs, incomes and labour intensity.

Green rush

The lack of verifiable links between investments in green tech and the creation of new jobs does not stop politicians from making bold promises and, in many cases, putting public money behind them. On the contrary, ‘green’ economic stimulus packages – whether they are in the US or Australia – are advertised as a key mechanism for battling unemployment and boosting sluggish economic growth.

In the case of many regional development agencies, green clusters are perceived as a magic bullet that can revolutionise economies and give a boost to locations that lag behind in terms of attracting investment. Similar to what occurred a decade ago with the biotech sector, it seems every location wants to jump on the green bandwagon, whether it makes sound economic sense or not.

“The problem is that often favourable geographic conditions do not overlap locally with other necessary inputs, such as skilled labour, manufacturing base for the construction and upkeep of installations and, last but not least, credit lines to help finance initial investments,” says Lucas Assunção, an expert on environment, climate change and sustainable development at the UN Conference on Trade and Development (Unctad). As a consequence, according to Mr Assunção, “deficiencies may lead to greater reliance on imports from other regions of both skills and hardware”.

China presence

To make matters even more complicated, it is not only about the lack of resources, but also price. Cheaper suppliers of components win the share of the green market, just as in any other market-based venture. Precisely, for that reason, China quickly rose to gain the dominant position as the solar photovoltaic (PV) systems supplier.

“The increased competition from Chinese renewable energy manufacturers has already affected European manufacturers,” says Dominic Fitzpatrick, partner at the international law firm Taylor Wessing. “More than one half of global production of solar PV panels and wind turbines is based in China. With increasing competition in [the country’s] domestic market, Chinese manufacturers are forming strategic partnerships with developers of renewable energy in Europe and elsewhere.”

Mr Fitzpatrick’s company has recently issued a report on perspectives for Chinese renewable energy investments in Europe. The report acknowledges that US and European companies will have to face increasing competition from Asian manufacturers; in the next 18 months, almost 70% of Chinese firms will look to either acquire or invest in Europe.

Nonetheless, Mr Fitzpatrick says that as long as intellectual property infringement issues are resolved, in the end many European markets can benefit from the influx of Chinese investments. “Chinese banks are providing export finance for these projects. At a time when European banks are under stress, this may facilitate access to funding for renewable energy development, particularly in developing renewables markets, such as Poland and Romania,” says Mr Fitzpatrick.

The industry is not quite so optimistic, however, as a coalition of seven US PV manufacturers led by SolarWorld postulated recently to impose retaliatory tariffs on the import of panels from China.

Clean hopes, dirty reality

“Unfair” competition from Chinese suppliers was quoted also by the bosses of US renewable firm Solyndra as the main reason for filing for bankruptcy in the autumn of 2011. Regardless of whether such claims are true or not, the complex case of Solyndra is an example of how investments in clean-tech industries can go dirty.

Solyndra, a California-based PV panels manufacturer, received a $535m federal loan guarantee in March 2009. When its operations went bust, along with the public money, the US Department of Energy was blamed for too hastily throwing money at Solyndra, eschewing necessary due-diligence, and putting too much belief in a project that was perceived as a model example of president Barack Obama’s professed commitment to investments in green technology.

Yet, despite the bad press surrounding the Solyndra case and subsequent wide debate about profitability of investments in renewables, green-tech clusters can be seen as a means for regional economic development. All experts interviewed for the purpose of this article stress that the creation of green jobs can provide sustainable economic gains, as long as it is planned by local authorities thoroughly, based on viable premises, rather than blindly following other regions marketing themselves as green-tech hubs.

Cashing in on the trend

So what conditions are necessary to make green jobs sustainable and how to assess whether a region has good potential to become a green-tech hub? Shawn Lesser, co-founder of the Global Cleantech Cluster Association, tells fDithat apart from the natural resources, what matters is the skills of the local workforce. This applies especially to regions that have had a high-tech industry previously, but due to shifts in demand for their products and services are looking for new avenues of growth. As an example of such a shift, Mr Lesser points to Oregon. In 2004, of the almost 200,000 employees working in the manufacturing industry in this US state, one-fifth was involved in producing semiconductors.

Due to cheaper labour costs, an increasing number of production plants were relocated to Asia, leaving a large number of highly experienced workers unemployed. However, thanks to tax incentives, according to the Oregon Growth Jobs Plan 2010 prepared by 3E Strategies – a non-profit organisation focusing on green energy – the increase of new jobs in the renewables industry was nearly five times higher than in other sectors (4.8% compared with 1%).

Mr Assunção, who together with his colleagues from Unctad – Henrique Pacini and Robert Hamwey – works on building a framework for investment opportunities related to the Kyoto Protocol, points out that close co-operation between regional authorities and local business can be another catalyst for economic development through green energy investments. “A planned and pragmatic dialogue between project developers, public authorities and the local business community is important with a view to creating local capacities, unlocking trade opportunities and developing a local supply of hardware and training,” says Mr Assunção.

He also adds that this will not only improve local energy services and create new commercial opportunities but will also decrease the cost of logistics – a point that often seems overlooked when considering importing materials for alternative energy plants. This in turn would reduce corporate carbon footprints.

The simple declaration that ‘green is good’ could get Mr Gekko as far as winning an election, but would not necessarily win supporters while in office. With all environmental and economic improvements that investments in green technologies can bring, hopes are sky high. But only comprehensive plans focused on linking new initiatives with existing businesses and training the workforce can ensure that the economic growth matches these heights.