Environmental Controls Are Good for Business

TIM BAKER

April 13, 1992|By TIM BAKER

Last month, the Maryland Senate's Judicial ProceedingsCommittee killed the governor's bill which would have required cars sold in this state to meet California's tough emissions-control standards. As usual, the bill's opponents argued that stricter environmental-protection requirements will hurt business. As usual, they had it exactly backward.

In fact, strict environmental standards enhance competitive advantage. That's the conclusion reached by Harvard Business School's Michael E. Porter. His best-selling book, ''The Competitive Advantage of Nations,'' shows that countries with the most rigorous environmental requirements often lead in exports of the very products that are subject to the strict regulations.

Here's why. People all over the world are demanding less pollution and safer products. Companies confronted by these demands in their home markets are forced to develop the necessary new technologies. That gives them a head start on their competitors in countries which have moved more slowly.

America enacted little environmental legislation between the landmark Clean Air and Clean Water Acts of the mid-1970s and the Clean Air Act of 1990. During the same period, Germany imposed the world's tightest regulations for stationary air-pollution control. Today, German companies enjoy a big lead in patenting and exporting air-pollution technologies. Meanwhile, America imports about 70 percent of its air-pollution control equipment.

Increasingly rigorous environmental-protection requirements are also driving one of our country's newest and most exciting industries -- environmental products and services.

Thousands of companies work in environmental engineering, clean-ups, hazardous-waste management, wastewater-treatment systems, air-pollution control systems, laboratory analytical services, solid-waste management, and legal and consulting services.

This industry is now growing more rapidly than information technologies or biotechnology. Environmental products and services have reached $130 billion a year, more than 2 percent of Gross National Product. They will account for $260 billion by the year 2000. The cost of cleaning up defense installations alone is increasing 25 percent annually and could total $1 trillion over the next 50 years.

The potential for exports is huge. Europe already spends $50 billion a year. Imagine the market in Eastern Europe. Germany predicts it will cost $200 billion to clean up the pollution left behind by communism in the eastern part of the reunited country.

America's leading center for this new boom industry is, of course, California. It already controls one fourth of the country's environmental services. For 20 years its companies have had to deal with and master the strictest ecological requirements in the nation.

As a result, California has built up an entire enviro-tech infrastructure of environmental engineers, consultants and lawyers. Entrepreneurs have started small pioneering companies to develop innovative environmental technologies. Local venture capitalists have invested more than $150 million in these new firms in the last two years.

There is even a huge opportunity for big utilities, defense companies and engineering firms to make ''green'' profits by solving the problem of air pollution in southern California. The Economist suggests that Los Angeles could become a ''Smog Valley'' where technological environmental innovation will create an economic miracle to rival the computer and microchip explosion in Silicon Valley in the 1970s.

There's a lesson for Maryland in all this. If our businesses succeed in ''protecting'' themselves from more rigorous environmental regulation, they'll cut themselves off from the dynamics driving the world economy in which they must compete. They will also thwart the development of this state's own growing environmental industry.

Two years ago, no directory of Maryland companies in these fields existed. So the Center for Global Change compiled one. Its preliminary search has now located more than 100 environmental firms from Tucker Barnes' brand-new Greenhouse Recycling in Columbia to Richard E. Hug's Environmental Elements Corporation, a large publicly held pollution-control equipment company in Baltimore.

The Center for Global Change at the University of Maryland, College Park, is an interdisciplinary research group which studies environmental-quality issues and their relationship to energy use and economic growth. It has concluded that Maryland already has a strong and rapidly growing industry in environmental products and services. It has recommended that the state government encourage its development by forming an environmental business council modeled after the one in Boston which has several hundred members.

The industry in Massachusetts now employs 30,000 people and generates $3 billion in annual sales. It adds 8,000 new jobs each year.

No one knows the exact size or potential of the environmental industry in Maryland. But we have all the components -- the companies, the technological base, the university research capacity, the big defense firms looking for new areas of business.

Now, if the politicians in Annapolis would just stop trying to block progress . . . .

Tim Baker writes on issues of city and state.

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