Summit to Save the Earth the Big Green Payoff

Who says what's good for the environment is bad for the economy? From electric cars to solar cells, products that protect the planet will earn hefty profits in the future.

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AT THE FRANKFURT AUTO SHOW LAST fall, BMW unveiled its vision of the future of driving. Called the E1, it is a four-seat car with a top speed of 120 km/h (75 m.p.h.) and a range of up to 250 km (155 miles). Not so swift, you say? But this car is a clean machine: it gives off no pollution that could foul the air in any way. The E1 runs on an electric motor powered by high-energy sodium-sulfur batteries. Although it takes electricity to charge the batteries, the power plants can be far from smoggy cities.

BMW is not alone. Just about all the world's major automakers, from Citroen to Chrysler, are revving up to produce electric cars. They realize that in the 21st century, consumers will increasingly favor -- and governments will mandate -- technology that preserves and protects the environment. The fortunes of companies and nations will rise and fall on how well they heed the call to save the planet.

The global market for environmentally friendly products is worth an estimated $200 billion a year, and has just begun to take off. Every potential innovation, whether a new kind of windmill or biodegradable plastic made from plants, is attracting attention from companies in a host of industrial nations. The U.S.'s Du Pont is in a race with Germany's Hoechst and Britain's ICI, among others, to develop replacement chemicals for ozone-destroying chlorofluorocarbons (cfcs). Germany's Siemens is vying with such firms as Amoco in the U.S. and Sanyo in Japan to produce cheap, efficient solar electric cells.

Who wins the races to perfect and sell green technologies will depend to a great extent on who has the edge in engineering and marketing skills. But equally important may be the encouragement companies get from their countries' political leaders. Governments can exert enormous influence over how aggressively businesses take the environment into account, using sticks and carrots -- sticks in the form of tough standards for products and manufacturing processes, carrots consisting of tax breaks and other incentives that reward innovation.

The U.S. government has, for the most part, done a poor job of spurring business to come up with breakthroughs. In the past, federal agencies issued environmental compliance goals, like standards for the amount of pollutants coming out of smokestacks, and then mandated the acceptable methods for achieving the targets. There was no incentive to do better than the standards or to develop innovative tools for meeting the goals -- tools that U.S. companies might market around the world.

The Clean Air Act of 1990 tries to change the old way of doing things; it allows companies to meet pollution goals by whatever means they can. With regard to emissions of noxious sulfur dioxide, the new law sets up a clever system in which companies and utilities will be issued permits to produce certain amounts of the gas. If a company finds ways to produce less SO2 than it is allowed to, it can make money by selling unused pollution permits to other firms. "This is the frontier of environmental policy," says Robert Stavins, an economist at Harvard's Kennedy School of Government. "It allows a firm to go out and choose the best technology it can. And it also provides an incentive to cut pollution below government requirements."

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