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Management Report

Management reports, briefs and video-clips issued by Samsung Economic Research Institute

Arrival of an Era of Green Growth

Arrival of an Era of Green Growth

LEE Jee-Hoon

Oct. 15, 2008

Transcript

Welcome to our video program. I’m Jee-Hoon Lee from the Public Policy Research Department.

“Green growth” is a new paradigm for economic growth that attempts to reduce carbon emissions and encourage more environmentally friendly industry. Low carbon emissions is a passive way of dealing with climate changes through reduction of CO2 emissions from industry and transport, while green “industrialization” refers to a more proactive way of improving the market by creating environmentally-friendly business models and technologies and using them to create new growth. Today we’ll take a closer look at how the world’s major countries and companies are seizing the initiative in the coming era of green growth.

One of the key motivators behind the emergence of green growth has been the many discussions about the establishment of the post-Kyoto Protocol system, aimed at making it mandatory for the US and developing countries to reduce carbon emissions.

Concerns are also growing about the eventual exhaustion of energy reserves, as prices for oil and coal have more than doubled over the past three years. The increased growth potential of the green market, including new areas like carbon emissions trading and renewable energy, are also contributing to awareness of the potential for green growth.

Under these circumstances, the world’s major countries are focused on attaining first- mover advantages in the green market. Japan, one of the global front-runners in energy efficiency, has established a new vision to transform itself into a low carbon society from 2007. To achieve this goal, the country has focused on the development of core technologies in the areas of energy efficiency and renewable energy. Led by the New Energy and Industrial Technology Development Organization, or NEDO, Japan has established a mid- and long-term R&D investment strategy to carry out a comprehensive evaluation of the commercial value of new technologies. For the development of next-generation green technologies, Japan is offering comprehensive support from the R&D stage up to commercialization.

Japan is not alone in this move. The EU is also making more efforts to expand and take the initiative in the green market through the introduction of a string of rigorous environmental regulations, including the reduction of CO2 emissions for automobiles from the current 140g/km in 2008 to 125g/km in 2015. The EU is also stepping up policy efforts to promote joint technology development among EU members based on the Renewable Energy Directive.

Even the US, which has typically maintained a somewhat skeptical attitude towards climate change, is looking for ways to take some of the momentum from Japan and the EU through intensive cultivation and development of next-generation technologies.

Well aware that the silicon solar cell market is already dominated by German and Japanese firms, US companies have expanded their investments in non-silicon solar cell technologies. The US is also carrying out intensive R&D programs in large-scale solar power generation, ligno-cellulosic bioethanol and IGCC.

At the same time, China, typically regarded as one of the world’s major polluters, is now also cultivating renewable energy. China now retains the world’s second largest solar cell producer, Suntech, and the world’s seventh largest wind power turbine company, Goldwind.

Along with the rapid growth of the green market, an increasing number of foreign companies are accelerating efforts to create new profit opportunities. Toyota, for example, has engaged in green projects since the early 1990s centering on automobiles, the world’s main source of air pollution. Ever since it succeeded in commercializing the world’s first mass market hybrid vehicle “Prius” in 1997, Toyota has released a total of 12 hybrid cars, with cumulative sales estimated to have surpassed 1.5 million vehicles.

Another example is Russia’s Gazprom. Under the banner of “carbon neutrality” the world’s largest natural gas producer has pursued a strategy of linking exports of natural gas with carbon emission rights. “Carbon neutral” refers to activities that neutralize the effect of corporate CO2 emissions. To neutralize CO2 emissions, businesses can purchase carbon emission rights, invest in new renewable energy, or plant new trees, so that their business activities do not, on balance, contribute to global warming.

Thus far, we have examined how the world’s major countries and companies cope with the coming era of green growth. Let’s turn to domestic companies in Korea. SERI has developed a green competitiveness index aimed at diagnosing green competitiveness among the world’s major countries, including Korea, Japan, the EU and the US. Among the 15 countries, Korea was ranked No. 11 in terms of green competitiveness.

Notably, Korea was positioned at No. 13 in the low carbon emissions index, indicating that the country is not fully utilizing new renewable energy and lags in energy efficiency.

When it comes to the green industrialization index, however, Korea was comparatively well positioned at No. 8, indicating that the domestic businesses have better competitiveness in environmental management and the creation of earnings in environmental industries. This can be interpreted as indicating Korea has a certain level of potential for green growth.

Green industry is emerging as a growth engine for the future of interest to both developed economies as well as recently industrialized countries like China.

Since green industry is still in its infant stages, there is as of yet no clear market leader, and there is ample opportunity for domestic companies to take a leading role. Accordingly, instead of regarding environmental issues only as a burden, the government and companies need to take a more proactive approach towards green industry as a promising source of revenue in the future.

To this end, the government needs to improve its legal and regulatory infrastructure. It also needs to establish a concrete strategy for the development of green industry on the basis of three factors: technology, industry, and export competitiveness. Businesses will also need to make maximum use of their capabilities to explore new business opportunities in the emerging green market, while strengthening green marketing aimed at promoting a more environment-friendly image.

Thank you for watching. I’m Jee-Hoon Lee.

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