Financial barriers continue to block green innovation, says EEA

A report by the European Environment Agency (EEA) has concluded that eco-innovation amongst small and medium enterprises (SMEs) faces 'major financial barriers' across the EU.

Green innovations in smaller businesses have stalled, although the increasing economic value of environmental improvements and the development of green markets are leading to change. A survey within the EEA report found that 60% of SMEs have ‘insufficient’ access to subsidies and incentives. (Scroll down for full report).

The report, entitled ‘Resource-efficient green economy and EU policies’, considers how European economies can drive more efficient resource management in the transition to a green economy and meet the EU’s greenhouse gas emissions targets of an 80-95% reduction compared to 1990 levels.

Recommendations in the report include examining an alternative system of environmental taxes to encourage job creation, green innovation and reduced environmental pollution. The idea put forward suggests using reduced labour taxes such as income tax and instead implementing a tax system based on resource use and environmental pollution.

Green competition

This can be seen in nations such as Germany, which has a high environmental tax rate compared to the rest of Europe and has also seen higher levels of green innovation. Forty-eight percent of inventors of international green technology patents in the EU were found to reside in Germany.

Environmental taxes could also encourage job growth and drive innovation, the report states, but are underused in the EU and were equivalent to just 2.4% of GDP in 2012. It found that countries with the highest environmental taxes ultimately ranked highly for eco-innovations and green competitiveness.

“Innovation may be the single most important driver to change the inefficient way we currently use resources,” said the EEA’s executive director Hans Bruyninckx.

“Environmental innovation is key to address the challenges of the 21st Century. If we want to ‘live well within the ecological limits of the planet’ as stated in the seventh Environmental Action Programme, we will need to rely heavily on Europe’s inventiveness. This is not just about new inventions – encouraging the uptake and diffusion of new green technologies may be even more important.”

Recession impact

The report also states that a shift in economic structure with a strong manufacturing base could lead to environmental innovations. Following the economic crisis, manufacturing had fallen significantly to 14.5%, but since 2009 it had increases slightly to 15.1% in 2013.

The economic crisis was found to have caused a slight reduction in greenhouse gas emissions in the EU. Despite this, since the start of the economic recovery in Europe emissions have reached a similar trajectory compared with pre-2008 levels.

Furthermore, following the financial crisis, Europe has not seen significant additional investment in efficient resource use in spite of calls during the crisis for a push towards a greener economy. For example, the share of green economy measures in Germany’s economic stimulus measures was estimated at 13.2 % for the years 2009 and 2010, while the share in the UK was comparatively smaller at 6.9 % between 2009 and 2012.

Download the full report – Resource-efficient green economy and EU policies – for free here. 

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