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Sat 6 Nov 2010 12:00 AM

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Eco-hub

Sami Mahroum argues that the region can become a centre of eco-innovation.

Eco-hub

Innovation for green growth is the new mantra for advanced economies. From Australia to the United States, governments are pouring billions of dollars into eco-innovation programmes.

The US has earmarked $59 billion for green technologies as part of its stimulus packages; Australia has dedicated A$5.7 billion, while Canada has set aside C$2.8 billion for that purpose. The aim is to become greener while staying competitive.

To succeed, any green growth strategy has to deal with the main source of CO2 emissions that is the built environment, and by extension the construction sector. Last year the UN Intergovernmental Panel on Climate Change (IPCC) identified building improvements as one way to reduce global warming pollution with net economic benefits.

The built environment is the biggest contributor of CO2 emissions (with 50% of the total), largely through electricity consumption and heating, but also through building materials, and related manufacturing and transport activities. Without tackling the problem of emissions, little progress can be made towards a more sustainable economy. For example in the US, ‘green buildings’ represent only 2% of commercial buildings and 0.3% of new homes. Yet the construction sector is notoriously known for its low level of innovation. Many builders do not invest in more efficient energy and water systems.

The governments of one region in particular stand a unique chance to revolutionise the construction sector. According to a recent study by Deloitte, a management consultancy, GCC countries have a pipeline of construction projects worth around $2,677 billion. This puts the Gulf among leading regions in the world in terms of market share. While the money is expected to come from both the public and private sectors, governments remain the most influential investors.

This puts GCC governments in a powerful position to shape the future of eco-innovation through their leverage of firms operating in the built environment. GCC governments cannot only drive eco-innovation in this sector, but also use it as an engine for knowledge transfer and diversification. In fact, the construction industry can become a springboard for new innovation-based industries.

This is not far-fetched, as the region is becoming increasingly better known for its large construction projects than for oil and gas. The recent opening of the world’s tallest free-standing structure, Burj Khalifa in Dubai, is only one attestation of this image change. Very large construction projects, such as the King Abdullah Economic City, the Jazzan Economic City, and the Knowledge City in Saudi Arabia; or the Abu Dhabi central business district, Saadiyat Island, and Reem Island projects in the UAE, and many other large-scale investments in schools, universities and museums across the region provide excellent platforms for governments to create strong incentives for local innovation activities to be developed around the niche of ‘eco-construction’.

Already the governments of both Abu Dhabi and Dubai, have introduced a green building code to help make their cities more energy efficient and environmentally friendly. But the opportunities presented by the large portfolio of infrastructure and construction projects in the region mean governments may combine the use of building codes with public procurement of major construction projects, to spark the emergence of a local eco-tech industry.

By taking active steps, the governments in the region can lay the foundations for a domestic eco-construction industry that is both green and internationally competitive. In particular, GCC governments may impose high ecological standards on major construction projects, demand that knowledge transfer elements be included in these projects, and provide various incentives for the domestication of related high value-added activities.

Without a proactive government strategy to view construction activity as a springboard to economic diversification, many of today’s construction projects might risk becoming castles in the sand 50 years from now.

Sami Mahroum is director of INSEAD’s Innovation & Policy Initiative in Abu Dhabi.

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