The "20-20-20" targets

To kick-start ef f orts to mitigate climatechange, the EU heads of state andgov ernment set a series of demandingclimate and energy targets to be met by2020, known as the "20-20-20" targets.These are:

• A reduction in EU greenhouse gasemissions of at least 20 percent below1990 lev els• 20 percent of EU energy consumption tocome f rom renewable resources• A 20 percent reduction in primary energyuse compared with projected lev els, to beachiev ed by improv ing energy ef f iciency .

Source: European Commission-ClimateAction website, January 29, 2011.

December 12, 2011 / Volume 11 / Issue 22 Dec 12 ED Now ED Now FAQs

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Green Manufacturing: What's Behind Europe's Strength, Plus Efforts to Boost theSector in Cleveland

By John Colm, President and Executiv e Director, WIRE-Net

How are manuf acturing leaders and organizations, policy makers and planners in Europe helping f irms enter greenmarkets - those f ueled by energy , env ironmental and climate change policy - and by extension, dev eloping theireconomies? As the head of WIRE-Net, a Clev eland-based nonprof it organization that supports manuf acturing asa source of community strength and economic growth, this is a question of great interest to me.

In 2010, I got the chance to examine this question in depth when I was awarded an Urban and Regional PolicyFellowship by the German Marshall Fund of the United States. Ov er the course of this f ellowship, I v isitedBarcelona, Spain; Bologna, Italy ; Essen and Stuttgart, Germany ; and Arhus and Copenhagen, Denmark.

Because of WIRE-Net's direct relationship with leaders of hundreds of manuf acturing f irms, I was interested inhow these policies were play ing out on the f actory f loor. On my trav els, I interv iewed 17 companies and 16business and technology centers that work closely with priv ate companies, along with national, city and regionalplanning leaders in all f our countries.

I also interv iewed manuf acturing and sustainability leaders in Clev eland to gauge how the lessons f rom theEuropean experience could be transf erred into workable solutions at home. This article summarizes what I learnedabout "manuf acturing a sustainable economy ."

The role of supranational (EU) policy

The rise of a "green" economy - the economic sector thatproduces goods and serv ices with an env ironmental

benef it1 - in Europe can be linked to the emergence ofgreen party mov ements in Germany and elsewhere, and theleadership of the European Union (EU) on climate changeand env ironmental issues. The EU has been a driv ing f orcein international negotiations that led to agreement on the twoUnited Nations climate treaties: the UN FrameworkConv ention on Climate Change in 1992 and the Ky otoProtocol in 1997. The Ky oto Protocol requires the 15countries that were EU members at the time to reduce theircollectiv e emissions to 8 percent below 1990 lev els by2012.

In 2007, EU leaders endorsed an integrated approach toclimate and energy policy and committed to transf ormingEurope into an energy -ef f icient and low-carbon economy .They made a unilateral commitment that Europe would cutits emissions by at least 20 percent of 1990 lev els by2020. This commitment is being implemented throughbinding legislation (see sidebar).

ec.europa.eu/clima/policies/package/index_en.htm

The Systems Viewpoint at Workin Cleveland

Holly Harlan, a f ormer engineer at GEPlastics, is the f ounding (now f ormer)director and president of Entrepreneurs f orSustainability (E4S), based in Clev eland.Ov er the past 10 y ears, E4S has grownf rom a small pilot project at WIRE-Net intoan independent, 4,000-member network ofbusiness leaders, entrepreneurs, activ ists,and artists.

Key observations

Three primary observ ations stood out regarding the driv ersof change in dealing with the env ironmental and economic challenges f acing Europe.

1) Aggressive national and supranational policies are leading to private innovation,investment, job creation and competitive advantage. The EU's more aggressiv e "f ramework" ofbroad env ironmental and energy targets has created long-term, stable market demand to whichEuropean companies hav e responded, creating signif icant global competitors in a v ariety of greenmanuf acturing markets (e.g., in wind, solar, water conserv ation, etc.).

In many countries, EU policies are amplif ied by national or regional regulations and targets (f orenergy reduction, f or example) and with env ironmental policies integrated into other sectors likehousing, regional dev elopment planning, transportation, and agriculture. This is contributing to aholistic and sy stemic approach to mitigating climate change and spurring economic dev elopment.

For example, Germany has set targets to:

• reduce carbon pollution by 40 percent of 1999 lev els by 2020• by 2020, increase renewable energy production to 20 percent of power generated• align with the EU goal of reducing energy use to 20 percent below existing growthprojections by 2020. New building codes hav e increased demand f or energy ef f icienthomes 900 percent between 1999 and 2007.

Spain f ollowed a similar path with its solar f eed-in tarif f (FiT) in 2007. (Feed-in tarif f s require utilitiesto connect to renewable energy producers and purchase that electricity on a long-term contract,ty pically at a price based on the cost of generation.) By 2008, Spain accounted f or 40 percent ofthe world's solar installations.

Italy is also seeing rapid growth in solar inv estments, due to establishment of its FiT in 2005. Italynow installs more solar capacity each month than does Calif ornia (the largest solar market in the

U.S.) in a y ear.2 Each country has its national champions - companies that lead the market andthat hav e created supply chains employ ing thousands as a result of well craf ted policies.

In sev eral places, Spain f or one, linking energy policy to employ ment policy has resulted in directjob creation impacts through the use of regional sourcing requirements.

2) The EU funds and supports networks of technology assistance centers that are highlyvaluable to the manufacturers they serve. Through these centers, European manuf acturing f irmscan access subsidized project and technical support to help them "green up" their products orexpand into new green markets (this network is analogous to the U.S. Manuf acturing ExtensionPartnership, but can count on longer-range, multi-y ear f unding). European f irms that are dev elopingexpertise in European markets are then well positioned to compete ef f ectiv ely in emerging greenmarkets around the globe.

3) Despite European countries'competitive advantages, a broadersystems view is lacking. Few of thecompanies v isited had adopted a sy stemsv iew of how 21st century "green companies"should operate. Policy makers I met withargued passionately that both companies andsociety need to take a sy stems v iew of theimpact of our industrialized economy on thenatural env ironment, without which indiv idualpolicies and company practices can createunintended negativ e impacts, or merelychange a sy mptom with no net improv ement

Harlan's model program is based on hermantra of "Connect-Learn-Do" andidentif ies six arenas in which organizationsshould f ocus to hav e a comprehensiv esustainability strategy . These includeculture (lev eraging employ ee choices insustainability ); f acility ; operations (waste,energy , procurement); products/serv ices(design f or env ironment); markets; andcommunity . (For more on E4S, seewww.e4s.org.)

Firms in each region were pursuingdiscrete parts of Harlan's model, but nonewere f ollowing it comprehensiv ely . Harlannoted that most companies start theirsustainability journey by tackling issues off acility and operations ef f iciency . But inorder to hav e long term regional impact,companies need to dev elop sustainableproducts and tap into markets in whichthese new products can be sold.

in env ironmental impact.

There is not necessarily a v iew of a "greeneconomy " in Europe, but a broad acceptance of thef inancial opportunities av ailable to companies thatunderstand and adapt to new green markets.

Taken as a whole

Regardless of one's v iew of the politics of climatechange, there is a large and growing global market fornew products and services in the green economy.Leaders of European technology centers repeatedlyreported that energy ef f iciency projects were thebiggest share of their portf olio. Ev ery businessv isited had dev eloped products or serv ices in thegreen economy , a part of their business that wasgrowing ev en during the f inancial crisis.Consultancies f rom McKinsey to Roland Berger notethe f ast growth of the clean tech sector.

The EU's and its member countries' ambitiousenv ironmental, energy and climate change policieshav e created a business env ironment that is sizable,predictable, stable, and reduces the risk of business inv estment in emerging green technologies. Europeancompanies that are pursuing green markets are f requently market leaders in their industries, and are positioned toexploit green markets now opening up worldwide.

The Cleveland experience: Green City on Blue Lake?

In Clev eland, interest in green markets has been growing f or the past 10 y ears, primarily f rom economicdev elopment and env ironmental organizations, including WIRE-Net's Manuf acturing Sustainability Learners Group,f ormed in 2001.

While some limited policy support exists at the f ederal, state and municipal lev els, it is not as f ar-reaching as it isin Europe. For example, under f ederal law, the Production Tax Credit (PTC) prov ides an income tax credit of 2.2cents per kilowatt-hour f or the production of electricity f rom wind turbines. Howev er, the PTC has historically hada sunset ev ery two y ears, and it has f requently f ailed to gain the political support needed f or renewal, leading toa boom and bust cy cle in U.S. wind turbine installations. A major campaign is under way now f or renewal of thePTC to preserv e thousands of U.S. jobs in the wind industry .

In addition, the PTC does not address the issue of where the turbines or their components are manuf actured,creating a disconnect between U.S. energy and employ ment policy . This has created a huge U.S. market f orEuropean and Asian turbine manuf acturers, with U.S. f irms mostly relegated to play ing catch-up. Many Asianproducers operate with strong gov ernment subsidies, which giv e them an adv antage in the U.S. market.Especially in today 's economy , this can undermine popular political support f or clean energy goals, as thepromise of new "green jobs" appears to hav e f aded.

• State efforts

At the state lev el, Ohio enacted an Alternativ e Energy Standard (also known as a renewable portf olio standard)that sets a target f or renewable and clean electricity production of 25 percent by 2025 (29 states and the Districtof Columbia hav e passed similar laws, but sev eral - including Ohio's - are now under threat of repeal oramendment).

Ohio's law is silent on where the alternativ e energy equipment is manuf actured; howev er, it has led to thedev elopment of Ohio wind f arms (with ov er a gigawatt now under dev elopment, enough to power about 750,000homes). These wind f arms can be a driv er f or localized production, giv en the size of utility -scale wind turbines.

The state of Ohio f unded a statewide supply chain dev elopment ef f ort in 2007-2008, which was managed byWIRE-Net's wind initiativ e, GLWN (f ormerly known as the Great Lakes Wind Network). GLWN and the OhioDepartment of Dev elopment partnered to establish Ohio's wind component supply chain as the best-def ined inthe nation. GLWN is now managing a project to help Ohio-based wind suppliers integrate Lean Manuf acturing intotheir business strategy to help them remain competitiv e in the global wind industry .

• Local efforts

Other opportunities to encourage green manuf acturing exist locally . Clev eland, like most U.S. manuf acturingregions, has a f ederally supported partner in the Manuf acturing Extension Partnership (MEP), f unded by the U.S.Department of Commerce. In cooperation with the U.S. Env ironmental Protection Agency , the MEPs hav eof f ered technical assistance consulting in the eco-manuf acturing arena through the "Eco-Smart" program.

This prov ides technical support to companies f or a v ariety of env ironmental improv ements, including greenproduct dev elopment. The expertise av ailable mirrors that of the European tech centers, many which pursue EUf unding f or industry partnership projects. The consulting f ees charged, howev er, are not inexpensiv e, and canpresent a barrier f or many small and medium-sized f irms.

Other initiativ es that support a "green markets" manuf acturing approach in the Clev eland region, plus supportinggreen policies in other areas, include:

• City support of the Clev eland Industrial Retention Initiativ e, managed f or the city by WIRE-Netas a resource and solutions broker f or the city 's 1,000 manuf acturing companies. (This programcould prov ide support to a signif icant part of the city 's economic base to "grow with green," as aWIRE-Net board member put it.)• NorTech's Energy Enterprise, a collaborativ e regional ef f ort to driv e growth across targetedsectors in adv anced energy .• The Corporate Sustainability Network, which encourages the sharing and implementation ofsustainable practices among the region's corporate sector.• The city of Clev eland of f ers building dev elopers a small interest rate "credit" on the f inancing f ora building or dev elopment that utilizes "green" design standards.• Along with its inner-ring suburbs, Clev eland is enacting Ohio's f irst Alternativ e Energy District.Within the district, a Property Assessed Clean Energy (PACE) f inancing tool is designed to helpbusinesses borrow f or energy improv ements, loans which then are paid of f through property taxassessments.

Clev eland May or Frank Jackson also has spearheaded "Sustainable Clev eland 2019," a city -wide sustainabilityef f ort, and has organized three annual regional sustainability summits since 2009. His goal is to make real apopular slogan describing Clev eland as a "Green City on a Blue Lake," and to make Clev eland a nationalsustainability leader by 2019 - the f if tieth anniv ersary of the inf amous Cuy ahoga Riv er f ire that helped giv e birthto the American env ironmental mov ement.

Many larger corporations are greening their production processes and dev eloping green products, but there aremajor opportunities to connect sustainability to Clev eland's 1,000 manuf acturers, not to mention the rest of themanuf acturing sector in the northeast Ohio region, which is the single largest consumer of energy . But a singlecity or a f ragmented American region still lacks the economic and policy lev ers to compete with what theEuropean Union is adv ocating f or its 17 member nations. National leadership is needed.

Sustainability is here to stay

Global warming, political instability in oil-rich regions and the nuclear disaster in Japan will combine to f urtherencourage the growth of clean tech and clean energy markets, as will continued natural resource scarcity . Clean

tech ov erall is projected to grow to more than $4.6 trillion3 by 2020. Within clean tech, worldwide clean energy

inv estment is projected to reach $2.3 trillion.4

Furthermore, the European Commission has just released an aggressiv e road map towards reduction ofgreenhouse gases by 80 to 90 percent by 2050. While support f or clean-tech policy in America continues tof alter, major play ers like China, Germany and the EU f orge ahead. The European (and Asian) experience at theregional and company lev els is demonstrating that a sweeping, long-term, stable policy regime is needed to

enable the f aster dev elopment of a U.S.-based green industry , as well as to create an env ironment in which moreef f icient and cost-ef f ectiv e technological innov ations can be dev eloped and brought to market.

Without broader, more powerf ul policy driv ers, such as f eed-in tarif f s, northeast Ohio's small and medium-sizedeco-manuf acturing f irms will be sev erely limited in their opportunities, and the market will be largely dominated byglobal play ers who are adapting to international green markets. Absent such action, the U.S. could be limiting itsmanuf acturing sector to "also ran" status in the world's growing clean tech industries.

Next Generation Manufacturing

Conducted in 2009, the Next Generation Manuf acturing surv ey used data f rom sev eral thousandU.S. small and medium-sized manuf acturers to identif y six success f actors critical to the "nextgeneration" of competitiv e manuf acturers. One of these is green and sustainable manuf acturing.

Green/sustainability ranks low among the strategic priorities f or U.S. manuf acturers despiteincreasing env ironmental regulation, growing consumer demand f or green products and cleanerproduction methods, and new requirements f rom manuf acturers f or greener supply chains. Only 16percent of respondents rank green/sustainability as highly important to their success ov er the nextf iv e y ears. Surprisingly , another 16 percent said it was not important…

The demand f or green/sustainability excellence - f rom customers, OEMs, policy makers andregulators - is impacting U.S. manuf acturers with growing f orce, and this pressure is expected toincrease substantially in the near f uture. America's manuf acturers must prepare to manage thistrend by being proactiv e, not reactiv e. Manuf acturers do not hav e the luxury of waiting until theyf eel ready to respond, because the f orces driv ing demand f or env ironmentally responsiblemanuf acturing are increasing in number and power ev ery day . U.S. manuf acturers must begin totake aggressiv e steps toward green/sustainable manuf acturing now, or they will suf f er negativ eimpacts to their rev enues, prof its, brand and reputation that may be irrev ersible.

From "Next Generation Manufacturing Study," by the Manufacturing Performance Institute for theAmerican Small Manufacturers Coalition, June 2009.

1 This is the def inition used by the Brookings Institution in Sizing the Green Economy , 2011, Wash, DC.

2 Westphal, Rene, "Global Solar Outlook: Optimism and Emergent Warning Signs", Solar Industry , September2010.

3 "The Green Machine", The Economist, March 13, 2010.

4 Pew Charitable Trusts, "Who's Winning the Clean Energy Race: G-20 Inv estment Powering Forward", 2011.

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