The Environmental Services Business. (Market Profile)

International Trade Forum, April 2001 | Go to article overview

The Environmental Services Business. (Market Profile)

Big and Growing: Though hardly known to the general public, environmental technologies, products and services have, in 20 years grown to match the aerospace and pharmaceutical industries in size -- a US$ 450 billion global market in 2000. By 2010 it is expected to expand to US$ 640 billion. Developing and emerging markets represent over 15% of this total.

Industry is hard to define...

In the first place, what are environmental industries? According to the Organisation for Economic Co-operation and Development (OECD), "the environmental industry consists of activities which produce goods and services to measure, prevent, limit and minimize or correct environmental damage to water, air and soil, as well as problems related to waste, noise, and eco-systems". This sector deals with waste management, air pollution, water and waste, along with environmental services and equipment. But the structure of the industry is rapidly growing and changing, and it suffers from a lack of clear identity and poor representation as a sector in its own right. Canada, Japan and the United States have adopted broad definitions of the environment industry. Italy, Germany and Norway, on the other hand, have chosen narrow ones. Such differences are bound to affect any data collected on the industry.

...making liberalization difficult

Even more important, the unclear definition of the industry may cause confusion in the application of World Trade Organization (WTO) agreements. There are separate WTO agreements dealing with goods and services, but this distinction is by no means clear in the environmental industry, for example, sewerage and wastewater treatment or solid waste management. This creates potential difficulties in liberalizing international trade in environmental industries, although the problems are now widely recognized. Various discussion papers were prepared in advance of the General Agreement on Trades and Services (GATS) 2000 negotiations. All these papers recognize that future trade negotiations should acknowledge the integration of trade in environmental goods and services.

Growth strongest in developing countries

The current market is dominated by developed countries in North America, Western Europe and Japan. However, developing and emerging markets in Asia and Latin America are growing rapidly as protection of the environment becomes a higher priority. Developing countries with growing populations and fast-paced development need environmental goods and services. In addition, aid agencies are placing a greater emphasis on sustainable development and environmental performance in their funding support programmes.

Market share to grow quickly

The 15% estimate for the developing and emerging markets' share of the environmental industry in the 21st century compares with an estimate of less than 10% in 1995, an indication of the speed with which these countries are expected to expand their environmental services. Over the decade to 2010, the United Kingdom's Joint Environmental Markets Unit predicts that developing and transition countries will expand their environmental business by 10% a year, producing a market of US$ 178 billion, compared with a 3% to 5% growth in developed economies, which will still hold the lion's share of the market (perhaps US$ 773 billion).

Factors driving growth

Statutory requirements

In North America, the impact of the North American Free Trade Agreement (NAFTA) and the demand for environmental services on the United States-Mexico border will be key driving forces for the market. Changes in environmental legislation and environmental standards required by consumers worldwide (ISO 14000) also mean opportunities for both foreign and domestic firms in the environmental services field. The European Union (EU), split between a generally mature system in the North and a developing infrastructure in the South, recently emphasized that EU candidate countries also need to take measures to harmonize existing legislation with EU environmental legislation. …

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