London scoping - ukcip

Final Report
182
7.8 Environmental Business
7.8.1 Context
Environmental business is most commonly associated with the recycling of materials though the
definition should be broad enough to cover any business activity that is responsive to
environmental issues and problems. Thus, the substantial business that has arisen in the
regulation of environmental impacts (e.g. environmental impact assessment, greenhouse gas
emission trading etc) may be considered under this heading. This activity is discussed in the
Financial Services section. Other environmental businesses include those related to energy
efficiency, flood protection engineering, waste management, consultancies etc. According to
the draft London Plan, the size of the sector in London is now equivalent to the pharmaceutical
sector, and forecast to double by 2010.
7.8.2 Impacts Due to Global Climate Change
The most significant climate change impact thought likely to affect the recycling industry in
London is the possible increased demand for recycled materials in manufacturing and retail
sectors as a result of relative price changes between recycled and virgin raw materials from
climate change impacts elsewhere in the world. The argument is that climate change impacts in
other parts of the world, such as South Asia, may have an impact on the supply of certain raw
materials for manufacturing. If supply is restricted – either by transport disruption or cultivation
patterns changing as a result of negative changes in temperature or rainfall – the price of the
commodity will rise, other things being equal.
Moreover, assuming a constant price of recycled raw materials, it is likely that there will be
some switching of demand from virgin materials to recycled materials, and a consequent
expansion of this type of environmental business. This argument may be the case for paper of
which a significant part of the market share is presently manufactured from virgin pulp in South
and East Asia. Current estimates of cultivation pattern changes (IPCC, 2001) tentatively
suggest a 1-5% increase in price for paper pulp in the next 15 years as a direct result of
temperature and rainfall changes. Although low confidence is placed in these estimates at
present, it is recognised that any change in relative prices of this nature will have a positive
effect on UK paper recycling industry. A similar argument can be made for the rubber
recycling industry since virgin rubber is also presently supplied from Asia. There is therefore a
potential opportunity to be exploited here – though it is clearly a regional, rather than a global,
welfare gain.
7.8.3 Impacts Due to General Climate Change
Two closely related arguments suggest that climate change impacts might have a positive effect
on environmental businesses.
First, it is possible that with heightened awareness of human responsibility for environmental
change, (such as the link being made between greenhouse gas induced climate change and the
Autumn 2000 floods in the UK), more pro-active steps will be taken by producers or consumers
to ensure that their actions have less of an environmental impact. This might manifest itself
either in reduced consumption levels or the use of more recycled materials, (and hence benefits
for environmental businesses), or both.