OPINION: THE GREEN ECONOMY:Ireland must come around to a new way of thinking if it is to play a meaningful role in the emerging green economy, writes Michael Casey

IT IS not all that long ago when "sustainable economic development" meant keeping inflation low and the exchange rate reasonably stable. Nowadays, "sustainability" has taken on a new meaning. The basic tenet now is that we cannot sustain economic growth if we damage the environment.

Some countries have tried to incorporate environmental damage into their national accounts, with the effect of reducing conventionally measured economic growth.

It is right that countries should be concerned with the natural environment. However, individuals going about their daily business can find it hard to do the right thing. It all sounds a little theoretical and not very pressing.

To entrepreneurs trying to maximise returns on investment in the short-term, much of the talk about protecting the environment can sound like pious platitudes someone else - big governments for example - should take care of.

Of course there are costs involved in being green. Most business people trying to get by, especially in a recession, would echo the sentiment of Kermit the frog: "It's not easy being green." (This song ran through my head when I last visited the Ballyogan Tiphead, now called a "recycling park", and strained my back trying to put rubbish into the correct skips.)

One problem is the fallacy of composition: individuals want to continue making money on the basis of self-interest, but this no longer benefits the collective good because it damages the environment.

We need a ringmaster to coordinate things. The US is powerful enough, but there is a tendency there to depend on technology to solve problems, rather than changing behaviour.

Some scientists have also begun to question the more catastrophic claims about global warming - Al Gore's An Inconvenient Truth, for example, is now widely discredited. This can lead the public to believe everything is exaggerated and the green agenda is more like an alternative religion than a matter of fact.

What is required is balance. Maybe we're not all going to be flooded or scorched in 10 years time, but we know many of the rivers in Ireland are badly polluted, we know drinking water is frequently contaminated and we know concrete infrastructure has reduced the soil's ability to soak up heavy rain.

The latter has contributed to flooding in towns that rarely, if ever, experienced it in the past. We also know fossil fuels are running out and could be exhausted in 40 years or so. The green agenda is, therefore, important.

In addition, an interesting change is occurring in the way people view it. Green issues are increasingly seen by entrepreneurs as opportunities rather than threats.

Bill Clinton has gone so far as to suggest these opportunities could well replace the ICT revolution that brought us the "new information economy". Increased awareness, it is claimed, will bring greater demand for green goods and services and for the new technologies that give rise to them.

A recent report by Forfás and InterTrade Ireland tries to identify the sub-sectors where Irish companies might be able to do business and create "green collar" jobs. Environmental goods and services (EGS) are defined roughly as those which relate to the study or improvement of water, air, soil, waste, noise, eco-systems and energy.

US economists have estimated the size of their domestic EGS market at $600 billion (€450 billion) in 2005. In Ireland the EGS market is around the €3.6 billion mark - or possibly more since this does not include building and construction materials.

At present, 6,500 people work in the EGS sector in Ireland. No breakdown of this figure is given, but it can be assumed many of these people work in the area of sewage and waste management.

The report acknowledges that Ireland is starting from a relatively poor research and development base, but points to certain advantages in the areas of wind and ocean energy and waste management.

The report suggests Ireland should focus on the following areas: renewable energy (solar, wind and wave), efficient use and management of energy, waste management, recovery and recycling, water and wastewater treatment, and environmental consultancy and services.

In some of these areas, particularly those relating to energy, indigenous Irish firms would more than likely need the help of US multinationals.

Consequently, the Industrial Development Authority should prioritise these areas. While the report suggests firms working in these areas should try to break into export markets, especially the UK, it is short on specifics and doesn't indicate what kind of growth we might expect in the EGS sector. This is a pity.

If it could be demonstrated that there would be rapid growth in demand in certain EGS areas, this might encourage more firms to get involved.

There is a general belief that our existing ICT platform could be harnessed to help firms exploit EGS opportunities and that there would be no shortage of venture capital. The latter may be optimistic, especially in the light of present banking difficulties.

The report seems aspirational given our track record in relation to energy renewables. The first oil crisis occurred over 30 years ago and the Irish economy was badly affected- little has been achieved in subsequent years.

We can hardly boast about water management after recent examples of contamination in Galway and Waterford. The fact 30 per cent of our reservoir water leaks into the ground due to faulty pipes is far from encouraging. There are also continuing problems with sewage treatment.

Converting waste to energy by incineration is still problematic and we lack the infrastructure for reprocessing waste, instead sending it to the UK, China and Germany for recycling. We also, of course, suffer from "NIMBY" syndrome ("not in my back yard") and cumbersome planning procedures.

The report devotes some attention to the question of skills and singles out environmental engineering as a qualification that should be taught. But how many students would be attracted into that discipline?

Like all such reports, there is an element of social engineering about it. The real question is whether the market for EGS will develop organically (no pun intended) to the point where Irish firms will become more involved. If, for example, the market determined relatively attractive salaries for environmental engineers, qualified people would be drawn into the area. But without the right market signals firms won't get involved.

It is just not clear whether Ireland has any clear comparative advantage in any of these EGS areas. The sub-sectors listed above are those which seem to have the greatest potential but the problem is they could have even greater potential for other countries. Ireland still has a green image, but it is rapidly being lost - the contamination of pig feed doesn't help - and we may not be able to trade on it for much longer.

There is a strategic question that needs to be examined. Even if we had the entrepreneurial drive to become a major player in biomass energy and a great deal of resources were put into that niche at home and abroad, what would happen if the world shifted its demand towards solar or some other form of energy a couple of years down the road?

The question is whether it is better to gamble on being the first mover - and somehow protect intellectual property rights - or to hold back and see more clearly how the wind is blowing. It is hard at this stage to predict which particular EGS will be in demand worldwide in the next few years.

Suppose, for example, some big countries decide to go nuclear, where would our fledgling biomass industry be? It is not clear that Irish firms would take big risks in any case, especially where complex intellectual property issues may be involved.

Our long tradition of attracting high- tech multinationals from the US has in many ways weakened our instincts for enterprise and real risk-taking.

A recent German study (reported on in Innovation in November), indicated Ireland has a relatively poor record in innovation. It seems likely we will depend mainly on foreign multinational companies to sort out our environmental problems. In the past, we gave generous terms to foreign energy exploration companies.

Of course it would be wonderful if some enterprising Irish company could develop some clean technologies or invent some hybrid products that would limit the need for rainforests to be cut down, but it doesn't seem likely. The best hope might be a third-level institution making a contribution at a theoretical level.

However, in general, if we maintain our small share of the world market for EGS we'll be doing well enough. In fact, if we maintain a clean environment on this island, it will be a good performance.

Even though the US does not have a good reputation in this area, because of its scepticism about the Kyoto agreement, there are a number of practical initiatives which have been adopted - ones we might do well to follow.

The US government has set up a central register for its EGS needs. Companies are invited to put their names on this register and become eligible to tender for federal contracts. An American entrepreneur has also developed a designers' accord which sets out guidelines for sustainable design. According to Fortune Magazine, more than 100,000 people and organisations have already signed on - including Johnson and Johnson, Adobe Systems and Autodesk.

To go back to the Ballyogan Recycling Park (AKA Tiphead), a cost-benefit analysis would more than likely show this facility not to be environmentally friendly at all. Thousands of people drive long distances every month to recycle garden and other waste which won't fit into the weekly wheelie bins.

The consumption of petrol alone would completely offset any environmental gain. If local authorities can't figure out a better way to solve a small problem - for example by having a special monthly waste collection - it is difficult to see Ireland as a whole playing a significant part on the world environmental stage. However, it would be wonderful if this view were proved wrong.