Greenest Nation

This is a trick question. What big country is, by most measures, greener than Japan and Germany and produces more geothermal energy than all of Europe combined? It might help to know that this nation is also a pioneer in environmental stewardship, having passed many of the world's toughest regulations on vehicle emissions, energy efficiency and nature conservation.

It couldn't possibly be the United States. By now all the world knows that America, with its cheap gas, plentiful coal and eight years of a Kyoto-treaty-bashing president in the White House, is the world's biggest environmental villain. After all, America emits 50 percent more greenhouse gases than the European Union for each dollar of GDP. Per capita it's even worse: 20 tons of carbon dioxide for each American per year versus just 8.4 for a citizen of Europe.

And yet, if you were to answer the United States, you'd be more right than wrong. The statistics for the country as a whole obscure tremendous differences among the individual states—several of which, on their own, would rank as major "green" countries in their own right (which gets us to the trick). California, with its 37 million people, emits 20 percent less CO2 per dollar of GDP than Germany. It generates 24 percent of its electrical power from renewable fuels like wind and solar, compared with only 15 percent in Germany and 11 percent in Japan. It also has the world's largest solar-power plant (550 megawatts in the Mojave Desert), the largest wind farm (7,000 turbines at Altamont Pass) and the most powerful geothermal installation (750 megawatts at The Geysers north of San Francisco). Although California isn't immune to the economic crisis—its finances are on the brink of collapse, which could translate into growing support for those who argue that green measures cost jobs—its green accomplishments put it at the head of the pack. If California were a country, its economy would rank as the world's 10th largest and could lay claim to be one of the world's greenest.

The significance of California's green credentials goes beyond Trivial Pursuit. With a new U.S. administration that has pushed energy security, climate change and a job-creating "Green New Deal" to the top of the policy agenda, experts believe that America could emerge as the world's green leader—out-innovating and out-competing Europe and Asia in environmental policy and technology. Not only has Barack Obama moved quickly to unblock states' initiatives—most notably California's plan to introduce some of the world's strictest limits on auto emissions, which Bush had used his federal powers to obstruct—but Obama also comes in with an extremely ambitious agenda of his own, including a pledge to cut America's CO2 emissions by one third by 2020 and 80 percent by 2050. If Obama's 2020 target becomes policy, it will require the United States to cut emissions from current levels by more than twice as much as the European Union—even more if the faster growth of the U.S. population is taken into account. More than $80 billion of the $787 billion economic-stimulus bill signed by Obama last week goes to spending and tax breaks for green projects, including $20 billion for renewable energy, $22 billion for conservation and efficiency measures and $17 billion for public transport. With Washington turning into an ally of America's green states and fast-growing clean-tech industry, the United States could start giving the European Union, Japan and other green leaders a run for their money. "What hasn't been happening in Washington, D.C., has obscured what's been happening all over the country," says Nicholas Parker, chairman of San Francisco–based Cleantech, an industry advisory group. "Watch out for the Americans—they're coming."

Indeed, California may be the greenest state in the Union, but it's not the only one. New York, with a population of 19.5 million, has even lower emissions (though that has a lot to do with much of its population living in one big city with close-knit public transport). All told, 11 U.S. states are already cleaner than Germany. America clearly has too many emissions-spewing "brown" states like energy-guzzling Texas and Florida, and Rust Belt–industrial Pennsylvania and Michigan. But neither is Europe evenly green. Twenty-three of the 27 EU members score worse than California, and several, such as Poland and the Czech Republic, spew out more emissions per dollar of GDP than big U.S. polluters like Pennsylvania. Look behind America's overall numbers and public image—no doubt dragged down by the obstructionist environmental policies of ex-president George W. Bush—and a much more progressive picture emerges. "Despite all the hollowing-out of environmental policy in Washington, there has been tremendous leadership at the state and municipal level," says Amory Lovins, director of the Rocky Mountain Institute in Boulder, Colorado.

California may have gotten recent headlines with Washington's permission to set de facto emissions standards for the nation (still subject to formal approval from the Environmental Protection Agency), but other states have moved just as aggressively. On Jan. 1, 10 Northeastern states, including New York and Massachusetts, started their own regional carbon-trading system, with the aim of cutting the region's CO2 output from power generation—roughly the same as Germany's—by 10 percent by 2020. Utilities in those states now have to buy a permit for each ton of carbon they emit; the states will, in turn, invest the proceeds in efficiency projects that cut power use. Seven Western states, including California, have joined with four Canadian provinces to launch their own cap-and-trade system by 2012. Both groups of states have bypassed Washington and entered talks with the European Union with the aim of creating a global carbon-trading regime. Last year the United States soared past Germany as the world's biggest generator of wind power, thanks to a surge in wind-farm investment led by Texas, where 5,000 megawatts have been installed in the past three years. Iowa, the third-biggest U.S. producer of wind power after Texas and California, now generates more than Japan.

If America now moves forward, as seems likely with the change of power in Washington, it would be a return to the environmental leadership of the 1970s and '80s. During the latter, for example, 90 percent of the world's wind-power installation took place in just one U.S. state: California. The 1970 Clean Air Act, the 1972 Clean Water Act and the 1980 Superfund Act (which forced companies to clean up toxic waste) were revolutionary at the time and only later adapted by other countries. California invented the vehicle-emissions regulations that were later copied in Europe and elsewhere. U.S. companies like Du Pont first commercialized substitutes for ozone-depleting coolants and aerosols. And America invented and set up the world's first cap-and-trade program to cut the sulfur and nitrogen emissions that cause acid rain. At international conferences on the environment, America pushed while big European polluters like Germany routinely dragged their heels in the name of saving jobs and profits.

It wasn't until Ronald Reagan slashed energy regulation in the 1980s that the roles reversed. But even today, the United States still leads in several areas of environmental policy, such as land conservation, biodiversity protection and clean-water laws. And unlike Europe, where environmental offenders often get away with a slap on the wrist, the United States has strict penalties for companies caught flouting regulations—including the threat of jail time for corporate officers and punitive class-action damages, says Andreas Kraemer, head of Ecologic, a Berlin-based green-issues think tank.

America could easily turn the last two decades of lagging on environmental policy and performance to its advantage. Obstructionism from the Bush administration has prodded states and communities to press ahead on their own, creating a fertile ground for new ideas. Twenty-four states, which together produce more than half of America's electrical power, have adopted so-called renewable portfolio standards forcing utilities to generate a minimum share of their power (usually 20 or 25 percent) from alternate fuels by certain target dates, as early as 2010 in California. That has fed a building boom for wind farms, geothermal generators and massive solar arrays, but leaves it up to the utilities to decide which technology they prefer. More than 900 U.S. cities have agreed to abide by the Kyoto Protocol, each coming up with its own schemes to cut emissions by retrofitting buildings, improving public transport or replacing municipal car and bus fleets with hybrids and other less-polluting vehicles. "We may look back and realize that George W. Bush and his friends did more for the environment by what they didn't do," says Parker.

Europe's centralized style means negotiating a new policy can take years, and then once it's done it may as well be cast in stone. That has benefits in predictability but America is often a more flexible laboratory for policy innovation. The vast and lively experimentation among state and local governments means that good policies can be quickly copied and bad ones adapted. Now that Obama is removing the federal veto for California's ambitious plan to cut tailpipe emissions, 13 other states have announced they will copy the same tough standard, which will effectively require automakers' vehicle sales in those states to reach an average fuel economy of 43 miles per gallon (six liters per 100 kilometers) by 2020. That would get California drivers closer to the 44mpg standard the European Union is phasing in.

With these states covering 40 percent of the world's largest car market, major automakers will be pushed to come up with new models, just as they did when California first regulated emissions in the 1970s. Other states may also follow California's newest plans: a sweeping efficiency initiative announced in September that calls for all new residential construction to be "zero net energy" by 2020, generating at least as much energy from rooftop solar panels and other on-site renewable sources as it consumes. "Thanks to this creative competition at state level, America may very well come up with a better system to limit emissions or a better system to promote the development and financing of alternative-energy technologies than Europe," says Miranda Schreurs, an expert on comparative environmental policy at the Free University in Berlin. One prerequisite, of course, would be for Obama to use national legislation to make sure the dirty states are onboard as well.

America has also been greening fast in its laboratories and startups. Year after year the nation funnels five to seven times as much venture capital into green tech than all of Europe combined, according to Michael Liebreich, CEO of London-based New Energy Finance, which tracks global green investments. Europe and Japan, says Liebreich, excel in lower-tech engineering and perfecting existing technologies—German and Danish manufacturers dominate the global market for wind turbines, for example. But U.S. companies are fast advancing in what they do best: inventing and commercializing radical, game-changing technologies. For instance, First Solar of Tempe, Arizona, has quickly grown into the world's biggest solar company, by market capitalization, by building thin-film modules that have cut the unsubsidized cost of generating solar energy to roughly the retail price of conventional power. Dozens of venture-funded startups are developing technology for energy storage and a digitalized "smart grid" that would transform the way energy is distributed. Better Place, a Palo Alto, California–based firm, has allied with Nissan and Renault to build electric-car infrastructure in California and Denmark. American biotech companies have refocused on the energy sector with such innovations as algae-based biofuels and organic solar generators that mimic the photosynthesis of plants. America's strength is pushing entirely new technologies onto the market, while Europeans tend to tinker at the edges. "If America ever manages to unleash its full entrepreneurial prowess on green energy," says Kraemer, "Europe will likely be left behind."

With the new drumbeat on environmental issues coming out of Washington, that could happen faster than you think. "We tend to think of European consumers as green, buying more organic food, putting up with subsidies for solar energy or public transport," says Cleantech's Parker. But American consumers are much faster to adopt new products and shift their habits in response to price signals or changing trends, he says. They bought more than 1 million hybrid cars in the past four years, compared with barely 200,000 sold to skeptical Europeans. Last June, when gas hit $4 a gallon, Americans slashed their driving by 12 billion miles (or 4.7 percent compared with the same month in 2007) and switched to public transport, taking 9.5 percent more trips. In what called a "seismic shift" in buying habits, sales of SUVs and trucks collapsed while compacts and hybrids gained market share. (That kind of responsiveness works both ways, of course. Recently hybrid sales have collapsed with the rest of the market. And the market share of big cars has risen due to the drop in gas prices and rebates of up to $10,000 on some SUV models.)

When Nissan comes to market with the first mass-produced all-electric car next year, much of the marketing push will be in the United States. Giant retailers such as Wal-Mart and Whole Foods have the market power to produce big, far-reaching changes in buying habits—as Wal-Mart has done by popularizing energy-efficient light bulbs, cold-water laundry detergents and less-toxic cleaning products among the 100 million customers it gets each week. That in turn, has forced its suppliers, from General Electric (light bulbs) to Procter & Gamble (detergents) to produce more ecofriendly products. In their power to affect both consumers and global supply chains, says Kraemer, they are unmatched by most of their European or Japanese competitors.

Europe, however, is ahead in some areas where America is unlikely to catch up soon. These include public transport, recycling, and waste and landfill management. This lead has much to do with geography and history: Europe's ancient cities and dense population simply leave less room for big cars and lots of driving. The new "smart growth" ordinances many U.S. states and cities have recently passed—requiring higher-density planning, sidewalks and public-transportation links for all new subdivisions—only begin to get the United States on track toward the less suburban, car-based lifestyle that comes as second nature to most Europeans.

It's unclear, too, how far the continued economic crisis—as well as the sharp drop of the price of oil—will shift the debate away from climate change, energy security and environmental protection. Financing for everything from new green-tech ventures to big offshore wind farms has dried up (though the same is also true for oil exploration and coal-plant construction). Low gas prices cut America's incentives to go green more than they do Europe's, for two reasons: the high oil price wasn't as painful for Europeans because it was partially offset by a rising euro, and Americans get more relief from the decline since they pay a much lower fixed tax per unit of fuel. But priorities are shifting in Europe, too. Germany, once a poster child of environmental-mindedness, now lobbies hard in the European Union to protect its automakers and other hard-hit industries from new regulations.

The world's (and many Americans') negative view of the U.S. environmental record won't change overnight. One key element—a national program to limit emissions, such as the cap-and-trade system the Northeastern states just started—could be stalled even before the debate has begun; in January, Speaker of the House Nancy Pelosi warned that it might take until the next Congress, in 2011, to write a law that stands a chance of passing. No doubt there will be other setbacks as the nation, and the world, struggle to get the economy back on track. What's certain is that the days of America as a hopeless environmental laggard are over, and a new debate and competition between the United States, Europe and Asia has begun. If it wants, America has everything in place to lead again.