Greenest Nation

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 Edmunds.com 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.