Who
will
win
the
green
race?
In
search
of
environmental
competitiveness
and
innovation
Sam
Fankhauser
a,*,
Alex
Bowen
a,
Raphael
Calel
a,
Antoine
Dechezlepreˆtre
a,
David
Grover
b,
James
Rydge
a,
Misato
Sato
aa
GranthamResearchInstituteandCentreforClimateChangeEconomicsandPolicy,LondonSchoolofEconomics,UnitedKingdom
b
DepartmentofGeographyandtheEnvironment,LondonSchoolofEconomics,UnitedKingdom
1. Introduction
Policy-makers increasingly place economic growth at the centre of discussions over environmental management. They wouldlikeenvironmentalpolicytobringmuch-neededjobs,new technologiesandcompetitivenesstodomesticindustry,aswellas toprotecttheenvironment.Creatingnewmarketopportunitiesis anexplicitobjectiveofgreengrowthpoliciesinEurope(European
Commission,2012).Chinaispromotingsevenstrategicindustries
(including,amongothers,cleanenergy,environmentalprotection andcleancars)thatithopeswillplaceitattheforefrontofgreen growth(Stern, 2010, 2011). South Korea, too, has made green growtha strategicpriority(MinistryofGovernmentLegislation, 2010).
This vision is supported by the emerging ‘‘green growth’’ literature.Counterbalancingcalls for de-growth (Jackson,2009;
Martı´nez-Alieretal.,2010),proponentsofgreengrowthassertthat
environmental stewardship is no impediment to economic prosperity,andmayinsomecasesbeaspur togrowth(Bowen
andFankhauser,2011;WorldBank,2012;Jacobs,2013).Yet,the
factorsthataffectthepotentialofenvironmentalpolicytoimprove competitiveness are poorly understood. And, perhaps as a consequence, thereis little evidenceaboutwho thewinners of theglobal‘‘greenrace’’mightbe.
Thisstudycontributesbothtotheconceptualunderstanding and to the empirical discussion of green competitiveness. We presentananalyticalframeworkbasedondecompositionanalysis that canhelptostructure a discussionthathassofarlackeda consistentanalyticalfoundation.Theframeworkidentifiesthree successfactorsforgreencompetitivenessatthesectorlevel:the speed at which sectors may convert to green products and processes(measuredbygreeninnovation),theirabilitytogainand maintain market share (measured by existing comparative advantages)andafavourablestartingpoint(measuredbycurrent output).Weapplythisframeworkto110manufacturingsectorsof eightmajoreconomies,basedonalarge datasetthatcombines patentingactivitybyover127,000firmswithinternational sector-level trade and outputdata. Our analysiscovers China,France, Germany,Italy,Japan,SouthKorea,theUKandtheUnitedStates.
ARTICLE INFO Articlehistory: Received22July2012
Receivedinrevisedform7May2013 Accepted12May2013 Keywords: Greengrowth Competitiveness Greeninnovation Manufacturing ABSTRACT
Astheworldconsidersgreenerformsofeconomicgrowth,countriesand sectorsarebeginningto position themselves for the emerging green economy. This paper combines patent data with internationaltrade and outputdata in orderto investigate whothewinners ofthis ‘‘green race’’ mightbe.Theanalysiscovers110manufacturingsectorsineightcountries(China,Germany,France, Italy,Japan,SouthKorea,UKandtheUS)usingdatefortheperiod2005–2007.Weidentifythreesuccess factorsforgreencompetitivenessat thesectorlevel:thespeedatwhichsectors converttogreen productsandprocesses(measuredbygreeninnovation),theirabilitytogainandmaintainmarketshare (measuredbyexistingcomparativeadvantages)andafavourablestartingpoint(measuredbycurrent output).Wefindthatthegreenraceislikelytoalterthepresentcompetitivenesslandscape.Many incumbentcountry-sectorswithstrongcomparativeadvantagestodaylagbehindintermsofgreen conversion,suggesting that they could lose theircompetitiveedge. Japan, and to alesser extent Germany,appearbestplacedtobenefitfromthegreeneconomy,whileotherEuropeancountries(Italyin particular)couldfallbehind.However,thegreeneconomyismuchbroaderthanthefewflagshipsectors onwhichthedebatetendstofocus,andeachcountryhasitsnichesofgreencompetitiveness.
ß2013TheAuthors.PublishedbyElsevierLtd.
*Correspondingauthor.+442071075427.
E-mailaddress:[email protected](S.Fankhauser).
ContentslistsavailableatSciVerseScienceDirect
Global
Environmental
Change
j ou rna l hom e pa ge : w w w. e l s e v i e r. c om/ l o ca t e / gl oe n v cha
0959-3780 ß2013TheAuthors.PublishedbyElsevierLtd.
http://dx.doi.org/10.1016/j.gloenvcha.2013.05.007
Open access under CC BY license.
We find that the green race is likely to alter the present competitiveness landscape. Several incumbent country-sectors withstrongcomparativeadvantagestodaylagbehindintermsof greenconversion,suggestingthattheymightlosetheir competi-tiveedge.ManufacturersinJapan,andtoalesserextentGermany, appearbestplacedtobenefitfromthegreeneconomy,whilethose inotherEuropeancountries(Italyinparticular)couldfallbehind. However, the green economy is much broader than the few flagship sectors on which the debatetends to focus, and each countryhasitsnichesofgreencompetitiveness.
Oursector-levelanalysisrelatestoalong-runningdebateabout thelinkbetweencompetitivenessandenvironmentalperformance attheleveloffirms(Porter,1991;PorterandvanderLinde,1995;
Reinhardt,1999;EstyandWinston,2009).Theempiricalevidence
from the firm-level literature is not always conclusive. For example,Martinetal.(2011)findthatclimate-friendly manage-ment practices are associated with lowerenergy intensity and higherproductivity.BeckerandShadbegian(2009)incontrastfind that‘green’manufacturingfirmsdonotsystematicallyoutperform ‘non-green’manufacturersonindicatorssuchassurvival,export growth,employmentgrowthandproductivity,althoughtheypay higherwages.
There is alsoa debateabout therole of industrial policyin shapingthegreeneconomy.Someauthorsseeaneedforindustrial policyduetoinformationexternalities(e.g.HausmannandRodrik, 2003).Others arguethat theinformationconstraintson policy-makersareprohibitiveandthatindustrialpolicyhasplayedonlya minorpartinrecentindustrialsuccesses(PackandSaggi,2006). What is clear is that business interest in the green economy depends on good and consistentpublic policy. Sound environ-mentalpolicies(e.g.apriceoncarbon)withlong-termcredibility areessential tocorrect basicmarket failuresand give environ-mentalservicesa monetaryvalue(Costantini andCrespi,2008;
Fankhauser,2012;Kennett and Steenblik,2005). Withoutthem
businessinterestsoondriesup.
Wedonotaimtoaddtotheindustrialpolicyorinnovation debateinthispaper,andindeedwewouldcautionagainsttrying toinfertoomanypolicyimplicationsfromourfindings.Ouraim issimplerandmoredescriptive:Toaddtotheunderstandingof greencompetitiveness atthesector level,focusing (somewhat narrowly)onmanufacturing.Thisisa questionofconsiderable interesttopolicymakers,asaseriesofpolicyreportsandcountry performance rankings attest (e.g. Ernst and Young, 2008;
ECORYS, 2009; Henderson et al., 2013; Pew, 2010; WWF,
2012).However,atthesector-levelarigorousassessmentbased onaclearanalyticalframeworkhassofarbeenlacking.Wealso assemble a detailed new dataset that can help with further researchinthisarea.
Thepaperisstructuredasfollows.Thenextsectionoutlines theanalyticalframeworkthatunderpinsouranalysis.InSection
3,wepresentthedataandintroduceproxiesforthethreefactors we use to assess green competitiveness. Section 4 presents results for the eight countries we consider and some key manufacturingsectors.Section5concludes.
2. Understandinggreencompetitiveness 2.1. Whatisagreeneconomy?
Thereisanestablishedtraditionofmeasuringthecontribution toGDP of theenvironmental goods and servicessector. In the definitionoftheOECD,environmentalgoodsandservicesinclude all activities that measure, prevent, limit, minimise or correct environmental damage (OECD, 1998). Other definitions vary
(Steenblik,2004),asdo numericalestimates,butitisclearthat
accordingtothisdelineationthegreeneconomyisworthseveral
hundred billion,and perhapsseveral trillion, US dollars a year globally(EBI,2012;ECORYS,2012;BIS,2011).
Yet, for many of its proponents green growth is about something more radical(Bowen and Fankhauser, 2011; Jacobs, 2013). Green growth advocates do not see environmental managementasjustanothereconomicsectoralongside conven-tionalactivity.Theyarguethattheeconomicchangesrequiredto combatproblemslikeclimatechangearenotmarginal,asmost traditional modelssuggest,buttransformativeandsystem-wide
(Perez,2010;Stern,2010).Thecreationofagreeneconomywill
thereforeaffectnot justa fewsectors buttheproductmix and productionprocessesofvirtuallythewholeeconomy.
Consistentwiththisliterature,weinterpretgreengrowthasan economy-widetransformation,ratherthantheexpansionofthe environmental goods and services sector. We are equally interested in the structural changes within a sector (say, the emergenceoflow-emissionstechnologyincarmanufacturing)as intheexpansionofonesector(suchassolarpanelproduction)at theexpenseofanother(suchascoalmining).
The idea of countries competing for market share in an emerginggreeneconomyisrootedinourunderstandingofthe organic,bottom-updynamicsofnationalandsectoral innova-tionsystems(Archibugietal.,1999;Dosietal.,1988;Malebra, 2002).Systemsofinnovationaredistinctnetworksofpublicand private institution within countries and sectors that initiate, coordinate, import, modify and diffuse new technologies. Innovation systems may explain why some sectors excel at adapting to and exploiting the opportunities presented by a green economy. Our expectation is that differences across innovationsystemswillreveallargedifferencesinthe respon-siveness of sectors and countriesto the opportunities in the emerginggreeneconomy.
The competitiveness literature suggeststhat green competi-tivenessis mostlikely tobederived fromexistingcomparative advantages,skillsand productionpatterns(Hidalgoetal.,2007;
HausmannandHidalgo,2010).Forexample,Germanydevelopeda
comparativeadvantageinwindturbinesonthebackofitsexisting expertiseinhigh-precisionmachining(Hubertyetal.,2011).We therefore treatexisting capabilities asa key indicatorof future comparative advantage in the green economy. This does not precludemarketentryandexitatfirmlevel.Theideaof‘creative destruction’, wherenewfirms andnewideasdrive out theold
(Schumpeter,1942),iscentraltothetypeoftransformativegrowth
thatthegreeneconomydiscourseespouses(seealsoAghionand
Howitt,1998,2009;Dosietal.,1988; Malebra,2002;Oltraand
SaintJean,2009;Perez,2002).
Structural changeofthis scale willcreate both winners and losers.Someeconomicactivitieswillbescaledback,andifthere arerigiditiesinrelativewages,skillsandproductiontechniques, this willlead toa temporary drop in outputand employment
(BabikerandEckaus,2007).Atthesametime,therewardscouldbe
massive for the winners of the ‘‘green race’’, which obtain a comparativeadvantageinenvironmentallybenignproducts and processes.
Althoughtheyareusedhere,termslike‘‘race’’, ‘‘comparative advantage’’ and ‘‘competitiveness’’ should be interpreted with caution (as famously argued by Krugman, 1994). Firms are competitiveiftheyofferproductsandservicesthatareindemand inthemarketplace(e.g.becausetheyarecheaperorofsuperior quality).Countriesgainacomparativeadvantage(andspecialise) in areas wheretheycan producewithlower opportunitycosts relativetoothers.Butthenotionofaracebetweencountries,or competitivenessatthecountrylevel,ismisleading(Voituriezand
Balmer,2012).Whatultimatelymattersatthenationallevelare
real incomes and productivity. The countries that develop a comparativeadvantageingreenergoodsandserviceswillbenefit
fromimprovedterms of tradeand thushigher realincomesas policies around the world raise the relative demand for such products.Butothercountriesbenefit,too,iftheshiftindemand towardsgreenergoodsandservicesismetbysupplyfromnations withacomparativeadvantageinproducingthem,keepingtheir relativepriceslowerthanotherwise.
2.2. Ananalyticalframework
To establish whois best placed tosucceed in anexpanding green economy we start with a hypothetical question: When future statisticians look back, how will they document the transitionfromtheeconomies of the2010s totheincreasingly greeneconomyofthe2030sand2040s?
We postulate that future statisticians might use the same analyticaltoolsthat today’seconomistsand statisticians useto disentangle the factors that determine a country’s energy efficiency, that is, tools such as index number theory and decompositionanalysis (e.g.Boydet al., 1987; Ang and Zhang,
2000; Cornillie and Fankhauser, 2004; Boyd and Roop, 2004;
Metcalf,2008;foranon-energyapplication,seeAntweileretal.,
2011).
Theymightstartwithanequationthatdescribesthesizeofthe greeneconomyincountryiattimet,Git,asthesumofgreenoutput
ineachsectors,Gist,whereGistisfurtherdecomposedasfollows:
Git¼ X s Gist¼ X s gistmistYst (1)
Ystdenotesglobaloutputfromsectorsattimet,andisdefinedas
the sum of country-level outputs, YstPiYist. Furthermore,
gistGist/Yististhegreenshareintheeconomicoutputofsector
sincountryi,andmistYist/Ystistheinternationalmarketshareof
countryiinsectors.
Future statisticians would then proceedto differentiate this equationwithrespecttotime.Theymayalsoundertakeaseriesof permutationstoexpresschangeindiscrete,ratherthan
continu-ous,time (seee.g.Boydetal.,1987;Metcalf,2008).Thiswould
allow them to document how the size of the green economy changes,timeperiodbytimeperiod,asaresultofchangesinthe threeconstituent elements of Eq. (1), that is, green conversion (changesintheshareofgreenoutputrelativetototalsectoroutput, gist);changes inmarketshare,mist,andchangesinthesizeofa
sectorworldwide,Yst.
Beforeapproachingthistask,wemaketwosimplifications.First we focus on thegreen output potentialof individual country-sectors,Gist,ratherthanthesizeoftheentireeconomy,Git.This
allowsustoignorethesectorsummations,andwecansimplifythe notationbydroppingsectorandcountrysubscripts.
Secondwemovethetotalsectorsize,Yst,totheleft-handsideof
theequation.This createsanewleft-hand variable
G
tGist/Yst,whichmeasuresgreenproductioninasectorandcountryrelative toglobalsectorsize.
Making these adjustments, differentiating the simplified equationwithrespecttotimeand integrating back,weget the followingexpressionforrelativegreenproductionatafuturetime T:
G
T¼ Z T 0@
gt@
t mtdtþ Z T 0@
mt@
t gtdtþG
0 (2)Eq.(2)tellsusthatfuturegreenoutputinacountry-sector,relative toglobalsectoroutput,dependsonthreetrends:
Greenconversion,thatis,thespeedwithwhichthegreensegment ofthemarketwillgrowwithinacountry-sector(e.g.therisein
renewable electricity at the expense of conventional power generationwithintheelectricitysector).
Changeinthemarketshareofa sector,thatis, theabilityofa sector to outpace the overall rate of growth (e.g. growth in electricity production as clean electricity replacesfossil fuels inheatingandtransport).
Theimportanceofgreenproductionattheoutset(i.e.renewable powergenerationtoday,relativetoglobalpowergeneration)
Eq.(2)alsomakesclearthattheconversionprocessdoesnot havetobesmooth.Itistheintegraloveradynamicprocessthat mayincludeupsanddowns.Weknowfromeconomichistory,for example, that there may be rebound effects and competing innovationinnon-greenproductsandprocesses(Fouquet,2010). This is sometimes called the ‘‘sailing ship effect’’ after the incumbenttechnologythreatenedbyinnovationwheretheeffect wasfirstobserved(Graham,1956).
Nevertheless,thethreefactorsabove,inalltheir complexity, arethedriversweneedtounderstandandestimateifwewantto assessthereadinessofcountry-sectors(andforthatmatter,firms) to compete in an increasingly green economy. The first two togetherindicatethegreengrowthpotentialinasectorandwillbe of particular interest below. The third factor determines the starting point, but also the relative importance of a sector in theglobaleconomy.
3. Measuringgreencompetitiveness
When documenting the emergence of the green economy, futurestatisticianswillbeabletotrackthethreetrendsofEq.(2)ex postandmeasuretheirrelativeimportanceusingactualdata.In contrast,ouranalysisisforward-looking.Thefirsttwocomponents ofEq.(2)inparticularcannotyetbemeasuredinthewayfuture statisticianswillbeableto.Thethirdcomponent,greenproduction today,shouldinprinciplebeobservable,butitturnsoutthatthe datatomeasureitmeaningfullyarepoor.
Wethereforerequireasetofleadindicatorsthatletuspredict thethreefuturetrendsexante.Inotherwords,wearelookingfor indicatorsofcountry-sectorperformancetodaythatarecorrelated withleadershipinthegreeneconomytomorrow,andcanserveas proxiesfor,futuregreenconversion,futuremarketshareandgreen productiontoday. Althoughtheconversionprocesseswe antici-pate are dynamic (as Eq. (2) makes clear), the lead indicators associatedwiththemcanbestatic,andtheywillnecessarilybe imperfect.Noindicatorcanpredictaccuratelyacomplexdynamic processseveraldecadesintothefuture.Nevertheless,theaimisto find themost credible suchindicators at the level of country-sectors.
3.1. Greenconversion
Themostpromisingindicatorforgreenconversion,thatis,the speedatwhichgreenoutputwillreplaceconventionalproducts andprocesses,isgreeninnovation.Thefocusoninnovation,rather than investment, is consistent with the view that ‘‘creative destruction’’ is the engine of transformative growth(Archibugi
etal.,1999;OltraandSaintJean2009;Perez,2002). Innovation
altersproductsandproductionprocessesmuchmoreprofoundly thandoesinvestment,althoughthetwoprocessesareobviously linked. While investment determines the future capital stock, innovationdetermineshowradically differentthatcapital stock willbe.Morebroadly,thereisawell-documented linkbetween innovation, productivity and economic growth (Aghion and
Howitt,1998,2009;Griliches,1979;Temple,1999),andbetween
innovation,industrialdynamicsandindustryevolution(Dosietal.,
We calculate for each country-sector an index of green innovation activity,which measures the ratioof green patents tototal(greenplusnon-green)patentingactivity.Theadvantages andlimitationsofpatentingasameasureofinnovationhavebeen discussedat length(seeGriliches, 1990;and OECD, 2009,for a recentoverview).Whilepatentsarenotacompletemanifestation of innovation, they are a core output measure that features prominentlyevenincomplexassessmentsofinnovation perfor-mance(forexample,Dutta,2012;HollandersandEs-Sadki,2013). Akeyadvantageforourpurposeisthatpatentdataareavailable atahighlydisaggregatedlevel.Thisallowsustomapinnovations in clean technologies, such as renewable energy technologies, electricvehicles,energy-efficientcements,insulationdevices,and so on. R&D expenditures cannot be disaggregated by type of innovationin this way.Further, R&Dspending istypically only reported for large firms, whereas ourdata are availablefor all patent holders, including small and medium-sizedenterprises. Patentdatahavebeenusedsuccessfullyinnumerousstudiesof green innovation (for example, Dechezlepreˆtre et al., 2011;
Johnstoneetal.,2010;LanjouwandMody,1996;Popp,2002).
Animportantlimitationis thatpossessinga patentdoesnot imply that the owner will actually use the technology and incorporateitintonewproducts.Yetthehighexpenseofpatenting deters the patenting of technologies that are unlikely to be deployed.Filingapatentcostsaround
s
5000inJapan,s
10,000in theUSands
30,000attheEuropeanPatentOffice(RolandBerger, 2005). Inventors are therefore unlikely to apply for patent protection unless they are relatively certain of the potential marketvalueforthetechnology.Intheabsenceofinformationon marketsharesofgreentechnology-basedproducts,weusepatents asasecond-bestindicatorofgreenconversion.Our Green Innovation Index (GII) takes thefollowing form, whichissimilartoWaltzandEichhammer(2012).Forabroader discussionofinnovationindicesseeGrupp(1994):
GIIis¼ pG is=pis P ipGis=pis (3) wherepG
isisthenumberofgreenpatentsandpisthetotalnumber
ofpatentsinsectorsandcountryi.Theindexthusmeasuresthe shareofgreenpatentinginaparticularcountry-sector,compared togreenpatenting inthat sectorovertheentirereferencearea (thatis,theeightcasestudycountries).Thenormalisationagainst broaderpatentingactivityisimportanttocorrectforidiosyncrasies inpatentingbehaviourinparticularsectorsorcountries.Indeed, evidenceshowsthatthepropensitytousepatentdiffers widely acrosssectors(Cohenetal.,2000).
ThehighertheGIIforasectorandcountry,thehighertheshare ofgreeninnovationinthatsector,comparedwithothercountries, and the more rapid (we conjecture) the conversion from conventionaltogreenproduction.
3.2. Changeinmarketshare
DrawingonHidalgoetal.(2007)andHausmannandHidalgo
(2010),ourconjectureisthatthefuturemarketshareofacountry
inaparticularsectorisrelatedtoitscomparativeadvantagetoday. Sectorswitha competitiveedgetoday aremorelikely (butnot certain) to besuccessful in the future. Despite its basis in the competitiveness literature, this is a strong assumption in thecontextofadeepstructuraltransformation.
Awidelyusedwaytomeasurecomparativeadvantageisthe Balassa index (Balassa, 1965). The Balassa index measures therevealedcomparative advantage(RCA) ofa country-sector ontheworldmarketbycalculatingitsrelativeexportshare.There areseveralvariantsoftheindex,eachwithitsownadvantagesand
disadvantages (Iapadre, 2001; Laursen, 1998). We use the standard formulation, which has the following structure (see
alsoWelfensetal.,2010forasustainabilityapplicationof
RCA-styleindicators): RCAis¼ eis=Pseis P ieis=PsPieis (4) whereeisisthelevelofexportsfromsectorsincountryi.The
numerator measures the share of exports in a country-sector, relativetototalexportsfromthatcountry.Thisisputinproportion to the same ratio (sector exports over total exports) for all countries in the sample. Unlike equation (3), which measures greeninnovationinabsoluteterms,thefocusintheRCAformulais on sectorexports relative toa country’stotal exports,i.e. on a country’s comparative (rather than absolute) advantage. The highertherelativeshareofexportsinacountry-sector,thehigher isitsRCAandthemorecompetitiveisthesector.
Thisindicatoroffersafirstindicationofaparticular country-sector’sabilitytogainandmaintainmarketshareinthefuture, althoughthereareclearlimitstousingpastsharesasapredictorof futuremarketsharesinthepresenceoftechnologydiffusionand major transformations driven by green innovations. Another drawbackoftheRCAisthatitexcludessectorsinwhichthereis nointernationaltrade,suchassomeservices.
3.3. Greenproductionattheoutset
Themainwayofmeasuringgreeneconomicoutputtodatehas beentoidentifyatahighlevelofdisaggregation(e.g.five-and six-digitlevel)thesectorswhoseactivitiesaredeemedtocontributeto environmentalprotectionandaggregatetheiroutputintoasingle value for the green economy (OECD, 1998; BIS, 2011). This approach tends to categorise sectors dichotomously as either ‘environmental’ or ‘non-environmental’, rather than assessing morebroadlytheshareofgreenproductioninallsectorsofthe economy. A study that does the latter is HSBC (2009), which calculates the green revenues earned by the world’s listed companies.TheHSBCindicatorconfirmsthatmuchofthegreen revenuedoesnotaccrueinexplicitlygreensectors,butmay,for example,concernthewindturbinedivisionofanengineeringfirm orthebiofuelactivitiesofoilcompanies.
Toassessthereadinessofindividualsectorsforthegreeneconomy, weneedameasureofthestartingpositionforeverysectorandnotjust forthosethathavebeendefinedas‘green’bytoday’sstandards.Tothis endweusetotalsectoroutputasaproxyfortotalsectorgreenoutput. Acountry-sectorwithahighleveloftotaloutputisassumedtohavea proportionally high level of green output therein. Naturally the strengthoftherelationshipbetweentotalandgreenoutputvaries acrosssectorsand,withgreenconversion,willchangeinfuture.Yet totaloutputoffersareliable,empiricallymeasurablestartingpoint thatisconsistentwithourmeasureofinitialcomparativeadvantage (basedonexports)andourrate-of-conversionmeasurebasedongreen patenting.Thelevelofgreenoutputdenotestherelativeimportanceof asectorwithinacountry,ortheproportionofoutputwithinasector globallythatisattributabletoacountry.
4. Empiricalevidence
Wenextturntotheempiricalanalysisofthethreekeyfactors thatpredictcompetitivesuccessinthegreeneconomy.According totheanalyticalmodel(Eq.(2)),thethreefactorsareadditiveand could in principle be combined into a single indicator of competitiveness in the green economy. We are not doing this andinsteadconsiderthethreefactorsseparately.Theirinterplayis discussedinqualitativeterms.TheadditivestructureofEq.(2)only
holds foraccurate expost data and not strictly for theex ante proxiesweuse.
Theunit ofanalysisinourdatasetisthecountry-sector.We consider110manufacturingsectorsatthefour-digitindustrylevel (ISICRev.3codes1511-3699,seeAnnex)ineightcountries(China, France,Germany,Italy,Japan,SouthKorea,USandUK).Alleight countrieshave large,globallycompetitive manufacturingbases, whichofferscopeforcomparisonbetweencountry-sectors.For38 sectorsoutputdatawerenotavailable(6inChina,4inFrance,7in Germany,3inItaly,6inJapan,1intheUKand11intheUS)and theseareexcludedfromoutput-relatedstatistics.
The110sectorsin oursampleplay differentrolesintoday’s economywithrespecttotheenvironmentanditsprotection.The sampleincludessectorsthat causemostenvironmentaldamage duringproduction,suchaspulp,paperandpaperboard.Itincludes sectorswhoseoutputcausesmostenvironmentaldamageatthe consumption stage,such as motor vehicles, and sectors whose outputmaycausemostdamage inthefinaldisposalstage,like processingofnuclearfuel.Thesamplealsoincludessectorswhich mayormaynotberelativelybenignintheirownenvironmental footprint, but which have the potential to contribute to the greeningofothersectors.Onesuchsectoriselectricitydistribution andcontrolapparatus,whichholdsthekeytosmarterelectricity grids.
Theempiricaldatacomefromanumberofsources.Patentdata aretakenfromtheOrbisdatabase,maintainedbyBureauVanDijk. TheOrbisdatabaserecordsthepatentportfolioofover500,000 companies worldwide. The 4-digit sector classification of the patent holders is also available, which allows us to match individualpatentstoeconomicsectors.Inordertoidentifygreen patents, we use the environment-related patent classification developedbytheEuropeanPatentOffice(EPO)andtheOECD.In particular, we use the recently developed Y02 class from the European Classification System (ECLA), which covers patents relatedto‘technologiesorapplicationsformitigationoradaptation against climate change’ (see Veefkind et al., 2012, for more information on the Y02 class; the list of environment-related patentclassificationcodesisavailablefromhttp:\\www.oecd.org/
environment/innovation).TheRCAindicatorwascalculatedusing
theUN CommodityTradeStatistics (ComTrade)database,while dataoncurrentoutputcomefromtheUN’sINDSTAT4industrial statisticsdatabase.
For each indicator, we took averages over several years to smoothoutyear-on-yearfluctuations.Thebaseperiodisthemean oftheyears2005–2007,exceptcurrenteconomicactivityinChina, which is for 2004/05. This has the advantage of avoiding the cyclical effects of the post-2007 economic crisis but the disadvantageof ignoring thelatest structural trendsin rapidly developingcountrieslikeChina.Inselectedsectors,theempirical analysis is complemented by a descriptive analysis based on conversationswithsectorandcountryspecialists.
4.1. Basicstatistics
Westartwithsomebasicaggregatestatisticstogainaninitial senseforthegreencompetitivenessofeachcountry.Table1shows a considerabledegreeof homogeneity withrespecttorevealed comparative advantage (RCA), which should not surprise in a sampleofleadingexportnations.However,thereisaclearleader ingreeninnovation(GII,ourmeasureofgreenconversion),where Japanhasthestrongestscoresformostindicators.
Japanistheonlycountrywithamediangreeninnovationindex thatisgreaterthanone.Ithas61sectorswithabove-averagegreen innovation,thehighestnumberofanycountrybysomedistance. These sectors account for two-thirds of Japan’s manufacturing output, compared with 20–40% elsewhere. Japan also has the deepestlevelofgreeninnovationinits15largestmanufacturing sectors.Japan’sleadingpositioningreenmanufacturingappearsto be long-lasting and was already observed in some very early studies on the green race in the 1990s (Voituriez and Balmer, 2012).SomeindustryexpertsattributethistoJapan’s‘‘patenting culture’’–patentnumbersisorhasbeenanexplicitperformance indicator at companies like Mitsubishi Heavy Industries, for example– but theGIIindicatorcorrectsfor suchcountry-level differences by focusing on thegreen sharein patentswithin a country.
AmongtheEuropeancountriesconsidered,Germanyhasthe strongestrecordongreeninnovation,secondonlytoJapan’s.In contrast,theotherEuropeancountriesappeartofallbehind.Italy in particular hasthe poorestrecordof all eightcountries,but therearealsosomealarmingresultsfortheUK,andtoalesser extent France.France,Italy andtheUK are theonly countries wherethemediangreeninnovationscoreisbelowthemedian RCA,implyinganoverallinnovationperformancethatisworse thanthecurrentcompetitiveposition.Thethreecountriesalso have the lowest number of sectors with competitive green innovation scores (GII>1) and most sectors without any greeninnovationatall.
Fortheremainingcountries,thepictureis mixed,although according to our data China’s innovation record is also quite patchy.This is at odds withthe ambitionsexpressed in China’s latest five-year plan (Stern, 2010), and we should expectChina’sperformancetoimproveastheobjectivesofthe five-yearplanareimplemented.
4.2. Resultsbycountry-sector
Thepicturebecomesmorenuancedaswedelvedeeperintothe green performanceof individualcountry-sectors.Aninstructive wayofpresentingcountry-sectordataisthroughscatterdiagrams, suchasthoseinFigs. 1and2,whichplotrevealedcomparative advantage(RCA) on oneaxisand greeninnovation(GII)on the other.Theimportanceofeach sectorattheoutset(itssharein
Table1
Aggregateindicatorsofgreencompetitiveness.
China France Germany Italy Japan S.Korea UK USA
MedianRCA 0.7 1.0 0.9 0.9 0.5 0.3 0.7 0.8
MedianGII 0.7 0.6 0.9 0.4 1.1 0.9 0.4 1.0
NumberofsectorswithGII>1 33 31 44 24 61 40 29 45 MedianRCAofsectorswithGII>1 0.7 1.0 1.0 1.1 0.6 0.5 0.8 0.9 OutputinsectorswithGII>1(%oftotal)a
25% 34% 40% 18% 65% 29% 26% 37% NumberofsectorswithGII=0 30 42 21 43 11 22 52 16 MedianRCAofsectorswithGII=0 1.0 0.9 0.5 0.9 0.2 0.1 0.5 0.6 OutputinwithGII=0(%oftotal)a 9% 17% 4% 30% 3% 3% 24% 7%
NumberofsectorswithRCA>1 42 55 48 51 36 22 31 40 MedianGIIofsectorswithRCA>1 0.4 0.6 0.9 0.4 1.1 0.9 1.0 1.0 OutputinsectorswithRCA>1(%oftotal)a
44% 56% 56% 51% 47% 46% 32% 55%
a
currentmanufacturingoutput)isrepresentedbythesizeofthe bubbles.
For both theRCAand theGII, scoresbetween zero andone indicateabelow-averageperformance.Thesampleaverageacross theeight countries is one, and scoresgreater than one signify above-averageperformance.Greencompetitivenessthusincreases aswemovetothetopandrightofthecharts.
Fig. 1 includes all 880 country-sectors. It shows green innovation and areas of comparative advantage over a diverse mixofactivitiesthatismuchbroaderthanthekeystonesectors typicallyassociatedwithgreengrowth(i.e.cleanenergy,cleancars and resource efficiency). The wide range of green innovation confirmsthat greengrowthconcernsmost,ifnot all,parts ofa moderneconomy.Toillustratethepoint,thetopthreesectorsin greeninnovationin eachcountryinclude areassuchasgeneral purpose machinery (China, Italy, USA), electrical equipment (Korea)andhandtools/generalhardware(France,Germany,Japan,
UK, USA), as well as in keystone sectors such as electricity distribution (which features in all countries except Korea). Similarly, countries’ comparative advantages are in areas such astoys(China),wine(France),motorcycles(Japan)anddistilling (UK),althoughstrategicsectorsfeatureinKorea(shipbuilding)and theUS(aircraftmanufacture,weapons).Italy’sstrongcomparative advantageinmachineryformetallurgyisalsoofnote,giventhat muchoftheinnovationinthestrategicsteelsectortakesplaceat theleadingplant-makers.
Nevertheless,it is instructiveto lookatthe mostimportant sectorsoftheeconomyinmoredetail.Fig.2thereforereplicates the scatterplots for the 15 biggest sectors in each country by output.Typically,thetop15 sectorsaccount foraround50% of manufacturingoutput.
Bothsetsofscatterplots(Figs.1and2)suggestthatthereisonly a weak connection between green innovationand comparative advantage.Overthefullsample,thecorrelationismildlypositive
Fig.1.Potentialareasofgreencompetitivenessbycountry.Note.Forpresentationalpurposes,thescalesforbothRevealedComparativeAdvantage(x-axis)andtheGreen InnovationIndex(y-axis)wereadjustedtomakethedistributions(whichareright-skewed)appearsymmetric.Excludes38country-sectorsforwhichoutputdataare missing.
inmostcountries,thatis,greeninnovationissomewhatstronger in areas of current comparative advantage. However, in two countries,ChinaandItaly,itisnegative.
Theweakcorrelationsuggeststhatthegreenraceislikelyto alterthecompetitivenesslandscape.Theleadingcountry-sectors oftodaymaynotbethedominantproducersinthegreeneconomy. Particularly at risk are the country-sectors located in the bottom-rightquadrantsofthescatterplots.Theycurrentlyenjoya strongcomparativeadvantage(highRCAscore),butarenotleading ongreenconversion(lowGIIscore)andcouldovertimelosetheir competitiveedge.Prominentincumbentsectorsinthiscategory includepharmaceuticalsinFrance,plasticsinItalyandchemicals in the UK. More generally, we observe a low level of green innovationamongthelargestleadingsectorsinChina,Italy,Korea andtoalesserextenttheUK(Fig.2).
However, it isdifficult todrawgeneral conclusions. Aircraft manufactureinFranceandtheUKbothfallintothebottom-right
quadrant,butindustryexpertsfeelthegreenracebetweenEurope andtheUS,theotherleadingmanufacturer,isstillneck-and-neck. Similarly,iron andsteelinChina,anothercountry-sectorinthe bottom-rightquadrant,shouldbeprotectedbyastrongdomestic marketaslongasChina’sconstruction boomcontinues.Korea’s leading steel maker, Posco, is known for its ability to adopt innovationsquicklyandimplementthematscale.Thisskillisnot reflectedinourGIIscore.
Another groupthatcould strugglein the greeneconomyis thesurprisinglylargenumberofcountry-sectorswithaGIIscore of zero. These are sectors that show no evidence of green conversion, even though there is green innovation at the international level. In France, Italy and the UK between 40 and 50 sectors (out of 110) fall into this category (Table 1
above).Theyare importanteconomicactivities,whichaccount for30%ofmanufacturingoutputinItaly,24%intheUKand17% in France. (Note that sectors without any green innovation
Fig.2.Potentialareasofgreencompetitiveness,15biggestsectorsonly.Note.Forpresentationalpurposes,thescalesforbothRevealedComparativeAdvantage(x-axis)and theGreenInnovationIndex(y-axis)wereadjustedtomakethedistributions(whichareright-skewed)appearsymmetric.ThesectorlabelsareexplainedintheAnnex.
anywhere in the sample were assigned a value of 1 in all countries).
TheGII=0groupincludesareaswheregreenpatentsarerare evenatthegloballevel,includingseveralagribusinesssectors,but italsocoverssectorswherethereisconsiderablegreeninnovation internationally,andwhichareofstrategicimportanceinagreen economy.Examplesincludesteamgenerators(nogreen innova-tion in any country except Germany and France), nuclearfuel processing(nocountryexceptFrance),pulpandpaper(nothingin France,Italy, UK), steel(Italy),batteries (UK),cement(UK) and enginesandturbines(Korea).
Thecountry-sectorsmostlikelytoreplacecomplacent incum-bents arethose locatedin thetop-leftquadrants ofthe scatter plots.Thesecountry-sectorsdonotcurrentlyenjoyacomparative advantage(lowRCAscore),butcouldbreakintothemarketonthe back of their strong green innovation record (high GII score). Refinedpetroleumproductsmightseethisshift,withFrance,Japan andtheUKalloutperformingKoreaandtheUS,whichhavethe highestRCA scores, on greeninnovation. However, therefining sectorasawholecouldloseineconomicimportanceastheworld movesawayfromfossilfuelsasasourceofenergy(Fankhauser, 2012).
The areas of particular promise in the green economy are those located in the top-right quadrants of the scatter plots, sincetheyexhibitcomparativestrengthinbothRCAandGII.The fulllist(showninFig. 1)is aneclecticanddiverse mixof115 country-sectors(i.e.about13%ofthesample),whichreflectthe breadth of the green economy. However, among the top 15sectorsbyoutputwefindmanyofthekeystrategicsectors ofthegreeneconomy(Fig.2andTable2).Firstandforemostare motor vehicles, which feature on the French, German and Japanese lists (and, through car partsand accessories, the US one).Thelist alsoincludesironandsteel (France)andaircraft manufacture(USA), as well as areas of traditional strength in countrieslike the UK (pharmaceuticals) andJapan (electronic goods).
4.3. Resultsforselectedsectors
Ourdatacanalsobeusedtoshowwhichcountriesenjoyagreen competitive advantage within specific manufacturing sectors. Whilethegreen economyis diverse, thereareseveral strategic sectorswhosetransformationiscentraltothecreationofagreen economy.InFig.3,weexploreeightofthem.
Theareaswestudyincludeindustrialprocesses,whichneedto becomecleanerandmoreresourceefficient(e.g.ironandsteel); sectors that are important for energy efficiency, both on the demandside(domesticappliances)andthesupplyside(electricity distributionsystems);thesupplychainforelectricitygeneration and other industrial processes (steam generators; engines and turbines;electricmotorsandtransformers);andcar manufactur-ing,bothdirectly(motorvehicles)andfurtherupthesupplychain (accumulators/primarycells/batteries,where progressis needed forelectriccars).
The innovation literature shows marked differences in the marketstructureandorganisationofinnovationactivitybetween sectors (Malebra, 2007). Some sectors are characterised by structural stabilityand innovativeactivity is concentrated in a fewincumbentfirms.Inothersectors,innovationisdynamicand turbulent, with frequent market entry and innovation activity acrossawidepopulationoffirms.
WeobservesomeofthesepatternsintheeightsectorsofFig.3. In twosectors, enginesand turbinesand motor vehicles,green innovationisdrivenbytheleadingcountry-sectors.Thereisaclear positivelinkbetweengreenconversionandcomparative advan-tage. In a further two sectors, domestic appliances and
accumulators/primary cells/batteries, there is little difference acrosscountriesintermsofgreeninnovation.
Inthesefoursectors,thecurrentcompetitivelandscapemay prevail.Inthecaseofmotorvehicles,carmanufacturersinFrance (e.g.Renault)andJapan(e.g.Toyota)havebeenattheforefrontof electric and hybridcar developments,while German manufac-turershavepushedconventionaltechnologies.Amongtheother countries,recentlytightenedemissionsstandardsintheUSmight triggermoregreeninnovationintheimportantAmericanmarket. TheUKhastraditionallyspecialisedinhigh-endvehicleswithhigh emissionfactors(thesuccessfulMiniapart),butJaguarLandRover, themainproducer,hasnowstartedtoloweremissionsinsome models.NewcomerslikeChinasometimesseegreentechnologyas awayofbreakingintothishighlycompetitivemarket,butsofar thedatadonotbearthisout.
In iron and steel and for steam generators, there is little variation in comparative advantage, but there are marked differences in green innovation. Especially intriguing is the dichotomy in steam generators, where green innovation is concentrated in just two countries, Germany and France. The absenceofJapaneseinnovationinparticularissurprising,giventhe record of companies such as Mitsubishi Heavy Industries and Kawasaki Heavy Industries. It is possible that their innovation
Table2
Top15sectors(byoutput)withcomparativeadvantageandgreeninnovation scoresgreaterthanone.
GIIscore RCA score
Output (%ofsample) China
Otherfabricatedmetalproducts 1.1 1.0 1.7% France
Basicironandsteel 3.1 1.1 2.2% Dairyproducts 2.8 3.0 2.6% Motorvehicles 1.2 1.4 9.8% Germany
Motorvehicles 2.2 1.2 13.0% Parts/accessoriesforautomobiles 1.6 1.5 4.3% Otherfabricatedmetalproducts 1.6 1.3 1.4% Italy
Structuralmetalproducts 1.2 1.0 2.6% Parts/accessoriesforautomobiles 1.1 1.1 1.9% Japan
TVandradioreceivers,assoc.goods 4.0 2.1 4.6% Motorvehicles 1.7 1.3 8.0% Otherspecialpurposemachinery 1.5 2.5 2.5% Parts/accessoriesforautomobiles 1.1 1.6 7.5% Electronicvalves,tubes,etc. 1.0 2.2 3.8% SouthKorea
Basicchemicals,exceptfertilizer 1.4 1.2 3.6% Otherspecialpurposemachinery 1.2 1.1 1.8% UK Pharmaceuticals,medicinal chemicals,etc. 1.8 1.9 3.3% Measuring/testing/navigating appliances,etc. 1.0 1.6 1.6% USA
Electronicvalves,tubes,etc. 1.6 1.3 2.5% Plasticsinprimaryforms,synthetic
rubbers
1.4 1.3 1.8% Basicchemicals,exceptfertilizer 1.2 1.2 3.4% Parts/accessoriesforautomobiles 1.2 1.3 2.7% Measuring/testing/navigating
appliances,etc.
1.2 2.1 1.9% Aircraftandspacecraft 1.0 3.6 2.9% Note.Allcountry-sectorswithascoreof1.0areroundeddown.Country-sectors witharounded-upscoreof1.0arenotincluded.
activitieswere allocated to other sectors, such as engines and turbines.
Inironandsteel,tworelativelysmallproducers,Franceandthe UK,areleadingthefield.Thisisunlikelytoalterthecompetitive landscapein thelongrun, however,whichis drivenlargely by factorssuchas labour and energy costs. In thecase of France, thehighGIIratioreflectsasubstantialresearchpresencein the countrybybiginternationalproducerslikeArcelorMittal.TheUK positionmay be related to leadership in building-related steel design,animportantareaforinnovation,butonethatmayrequire strongerbuildingregulationstofulfilitspotential.Itisalsoworth remembering that our analysis is omitting important steel producers such as Russia and Ukraine. Their success is based primarilyongoodaccesstorawmaterials,ratherthaninnovation. Oneinterestingpatternintheremainingtwosectors(electricity distributionand electric motors/generators/transformers)is the positionofKoreaandsurprisinglyalsotheUKandtheUS,which
aremid-rankingintermsofcomparativeadvantage,butstrongon greeninnovation.Ifthispersiststheymightbeabletocatchup withthecurrentleaders.
Overall,alleightcountrieshaveareasofpromise,butalsoclear weaknesses,inthestrategicsectors.Therelativelyweakpositionof Chinareflectsamanufacturingindustrythatduringour2005–07 snap-shotwasheavilydependentonlowandmid-level technolo-gies,combinedwithlow labourcost.Chinaexperts believethat thisisalreadystartingtochange.Korea’sstrengthsareonbatteries, but also electric motors/generators/transformers and maybe electricity distribution. Japan and the US continue to lead on enginesandturbines.Germanywillbesatisfiedwiththestrong competitivepositionofitsexportindustry,includingan automo-tivesector that accountsfor 13% of manufacturing output.For France,theremightbeopportunitiesinsteamgenerators,motor vehicles and perhaps iron and steel, three areas where it has prominentlocalchampions.Italyhasamixedrecordoverall,but
Fig.3.Greencompetitivenessinselectedsectors.Note.Forpresentationalpurposes,thescaleforbothRevealedComparativeAdvantage(x-axis)andtheGreenInnovation Index(y-axis)wasadjustedtomakethedistributions(whichareright-skewed)appearsymmetric.Thecountrylabelsare:CHN=China;DEU=Germany;FRA=France; GBR=UnitedKingdom;ITA=Italy;JPN=Japan;KOR=SouthKorea;USA=UnitedStatesofAmerica.
could be well positioned in domestic appliances and electric motors/generators/transformers.TheUKmayhaveopportunities inenginesandturbines,whereithasastrongbasearoundRolls Royce, and perhaps electricity distribution. However, Britain performs poorlyon steamgenerators, domestic appliancesand (forthetimebeing)motorvehicles.
5. Conclusions
This paper explores the question of green competitiveness, broadlydefined.Itis importanttorecognise thatgreen growth would‘‘liftalltheboats’’.Producersandconsumersalikewould benefit from an economy that is low-carbon, climate-resilient, resource-efficientand biodiverse–thekeyattributesassociated with green growth (Bowen and Fankhauser, 2011). Yet policy makersarealsointerestedtoknowwhichcountriesandsectors mightparticularlythriveinthegreeneconomy.Thisisrelatively newresearchwithfewmethodologicalorempiricalprecedentsto drawoninthepeer-reviewedliterature.(Thereismoreinthegrey literature.)
Thepaperofferspreliminaryconclusionsalongthreelines.First, intermsofsubstantiveresults–thequestionraisedinthepaper’s title–weconcludethateachoftheeightcountrieswestudyhas areasofgreencompetitiveness.Theyalsoappeartohaveareasof weakness,and it is likelythat thegreen racecouldchangethe competitive landscape. In some areas the incumbent country-sectorsleadthegreenrace,suchasmotorvehiclesandenginesand turbines.Butinmanyothersthecountriesthatcurrentlyenjoya comparativeadvantagearenottheleadinggreeninnovators.Some ofthem couldlosetheir competitive edge.Thesestrengthsand weaknesses are reflective at least in part of the distinct institutional networks and endowments that make up the innovationsystemsofacountry-sector.
The manufacturing sectors of Japan and to a lesser extent Germanyseem best positioned to take advantage of thegreen shake-up.Italy’smanufacturingsectorhastheworststatisticsand couldfallbehindinthegreenrace.Therearealsoquestionmarks (basedonour2005–07snapshot)aboutChina.IntheUKgreen innovationis concentrated, perhapsstrategically, in theenergy intensiveindustries.
Wefindthatthegreeneconomyismuchbroaderthanthefew flagshipsectors(e.g.cleanenergyand cleancars)onwhich the debatetendstofocus.Theseareundeniablyimportant( Fankhau-ser, 2012), but there are areas of green entrepreneurship and innovation across themanufacturing sector, including in areas suchasmachineryandconsumergoodsandonimportantissues likeresourceefficiencyandwastemanagement.
Thesecondsetof conclusionsconcerns policy.We havenot analysedwhichpoliciesarebestsuitedtohelpcountriesorsectors win the green race. However, it is clear that public policy is important.Akeychallengeforthegreeneconomyistoovercome persistentmarket failures(e.g.on innovation) and externalities (e.g.pricingtheenvironment),whichrequireswell-designedand consistent public policy intervention. Business decisions on investmentandR&Dinparticularrespondtosuchpolicysignals. However,adetailedanalysisofgreenindustrialpolicies–andtheir interplaywithotherfactorssuchasenergycosts–isbeyondthe scopeofthispaper.
Whatwecanobserveisthatthecountriesinoursamplehave notbeenparticularlystrategic in their greengrowthstrategies. Thereislittleevidencethattheyarepromotinggreeninnovation specificallyintheirareasofcomparativeadvantage,thusbringing together the two main ingredients for green growth. The correlationbetween green innovation and current comparative advantageisweak.However,amoredetailedanalysisatthesector levelwouldberequiredtounderstandthesetrendsfully.
Thethirdsetofconclusionsconcernmethodology.Wehaveput forward an analytical framework, based on decomposition analysis, which we believe is well suited to assess green competitiveness andthepotentialforgreengrowth.Infact,the frameworkissuitedtoanalysestructuraltransformationsofany kind, and may have applications in other areas such as biotechnology. It also offers a basic structure for simulation modelsofthegreeneconomy.
The framework highlights the need for green conversion (throughinvestmentandinnovation)inallsectorsoftheeconomy, andnotjusttheenvironmentalgoodsandservicessector.Italso emphasisestheneedtobuildoncurrentcomparativeadvantageto developandmaintainmarketshare.
Weareonlesssolidgroundwhenitcomestotheproxiesused to measure these key factors. They are imperfect on several accounts.Therearelimitstotheavailabilityofdata,includingon thesizeofthegreeneconomytoday.Therearequestionsmarks abouthowaccuratelygreenpatenting(ourmeasureofinnovation) reflectsthecomplexdynamicsofgreeninnovation,andhowwell theplace ofpatentregistrationpinpoints theactuallocation of innovative activity (particularly for multinational companies). Similarly, our measure of comparative advantage, the Balassa index,isbothtoonarrow(i.e.limitedtotradedsectors)andtoo broad (i.e. covering both traditional and green comparative advantage).
Intermsoffutureresearch,itwouldbegoodtohaveabetter empirical understanding of how our indicators of green innovation and comparative advantage actually contribute to growth.Overtime,thiswillbecomepossible,butatthemoment it is still hard. Given that we are studying a structural transformation, past trends are only of limited use. A fruitful areafor futureresearch wouldbetoinvestigatewhich sector-levelinstitutionalformsandinteractionsunderpinthestrongest andweakestgreenconversionratesobservedacrosssectorsin ourinvestigation.
The scopeof our analysis leaves important omissions. The eightcountrieswestudyaccountforalmosttwo-thirdsofglobal economic output, butdata constraints meantwe hadtoleave out many important economies, both present and emerging. Alsofordatareasonsthefocushasbeenonmanufacturing.This is too narrow. Modern economies are predominantly service-oriented, and there are considerable green opportunities in sectors such as finance, consulting, engineering, architecture andeducation.InEurope,atleast,thegreengrowthdiscussion has focused heavily on manufacturing, but there are good reasons to believe that the green economy will be a service economy.
Theprocessesthatdrivegreencompetitivenessareinherently unpredictable.Theleadersandlaggardsthatwehaveidentifiedin theglobalgreenracetodaycouldchangerapidlyinthemedium andlongtermfuture.Ourhopeisthattheanalyticalframework laidoutherewillbeusefulformeasuringandunderstandingthis competitiveprocess,howevertheraceplaysout.
Acknowledgements
WearegratefultoChrisBeauman,MatthewBrown, Emman-uel Guerin, Stephane Hallegatte, Takashi Hongo, Julia King, Myong Kyoon Lee, Jim Skea, Michael Spackman, Richard Tol, Terry Townshend and Alan Winters for their comments and feedback. Thework is partof aresearchprogramme ongreen growthsupportedbytheGlobalGreenGrowthInstitute(GGGI). We also acknowledge financial support by the Grantham Foundation forthe Protection of theEnvironment andthe UK Economic and Social Research Council (ESRC). The usual disclaimerapplies.
AppendixB. Supplementarydata
Supplementarydataassociatedwiththisarticlecanbefound,in theonlineversion,atdoi:10.1016/j.gloenvcha.2013.05.007.
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AnnexListofsectors
1511 Processing/preservingofmeat 2696 Cutting,shapingandfinishingofstone 1512 Processing/preservingoffish 2699 Othernon-metallicmineralproductsn.e.c. 1514 Vegetableandanimaloilsandfats 2710 Basicironandsteel
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1711 Textilefibrepreparation;textileweaving 2911 Enginesandturbines(notfortransportequipment) 1721 Made-uptextilearticles,exceptapparel 2912 Pumps,compressors,tapsandvalves
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1911 Tanninganddressingofleather 2923 Machineryformetallurgy
1912 Luggage,handbags,etc.;saddleryandharness 2924 Machineryforminingandconstruction 1920 Footwear 2925 Food/beverage/tobaccoprocessingmachinery 2010 Sawmillingandplaningofwood 2926 Machineryfortextile,apparelandleather 2021 Veneersheets,plywood,particleboard,etc. 2927 Weaponsandammunition
2022 Builders’carpentryandjoinery 2929 Otherspecialpurposemachinery 2023 Woodencontainers 2930 Domesticappliancesn.e.c.
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2221 Printing 3220 TV/radiotransmitters;linecomm.apparatus 2222 Serviceactivitiesrelatedtoprinting 3230 TVandradioreceiversandassociatedgoods 2310 Cokeovenproducts 3311 Medical,surgicalandorthopaedicequipment 2320 Refinedpetroleumproducts 3312 Measuring/testing/navigatingappliances,etc. 2330 Processingofnuclearfuel 3313 Industrialprocesscontrolequipment
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