(FORTUNE Magazine) – AMERICA'S GROWING environmental concern has been matched, and in many ways exceeded, by the stunning rise of the so-called Green movement in Western Europe. Once thought of as little more than business-bashing cranks, the Greens have moved from the political fringe to the center. Consumers are in the forefront of the drive, combing supermarkets for ecologically friendly products, such as phosphate-free detergents. Increasingly they are willing to pay extra taxes or higher utility bills for cleaner air and water. The ramifications for European industry, and all Americans doing business there, are enormous. Many companies face huge increases in capital investment and production costs. Automakers, including Ford and General Motors, will spend an extra $7 billion a year between now and 1993 to install antipollution equipment in all cars. In some industries environmental laws will be indiscernible from protectionist measures, hampering the European Community's drive to create a unified market and helping to stifle the expansionary dreams of Coca-Cola and PepsiCo, among others. For many companies, though, the Green revolution is a boon. Nimble consumer goods makers are gaining market share by launching a host of environmentally friendly household products. Procter & Gamble, following the lead of a Swedish company, has begun to sell diapers in Britain made from pulp that is bleached without using toxic chlorine gas. Producers of pollution-control equipment will cash in. Europe had a lot of cleaning up to do. Weak laws and lax enforcement in many countries allowed industrial companies to pump wastes into the air and water with impunity. Led by the European Community, the scrubbing has begun. A year ago the EC passed legislation that imposes strict limits on emissions from new power plants and requires existing ones to meet the standards by 2003. Regulations for chemical plants are expected soon. Meanwhile, governments are rushing to meet -- or improve on -- the EC regulations. Although the EC has long had stringent standards for water quality, few countries took them seriously until now. The new attitude is most dramatic at Britain's Water Authorities, the state-owned utilities that operate the nation's sewer network and supply 75% of its drinking water. This fall the government plans to sell up to $11 billion of shares in the Water Authorities to the public. But there is one problem -- the Authorities have been violating EC water-quality standards since the standards took effect in 1985. The EC has filed suit against Britain to force compliance, but privatization is the real impetus for change. To attract investors the government has developed precise water-quality and sewage-discharge standards and spelled out where the money to meet them will come from. The program will cost $35 billion in inflation-adjusted dollars over the next ten years, more than double the amount spent in the 1980s. SURPRISE EC legislation is sending shock waves through Western Europe's $100-billion-a-year auto industry. Europe has long trailed the U.S. in reducing automobile emissions. Many European automakers resisted pollution- control equipment on the grounds that it would not only increase small-car prices but cut fuel economy. Until recently the EC imposed easy-to-meet regulations that suited small-car makers. A 1985 EC law -- updated earlier this year -- mandated U.S.-style standards for big cars but set far looser targets for smaller ones. Several producers reckoned they could meet the standards by equipping cars with so- called lean-burn engines, which minimize the amount of gasoline in the mixture of gasoline and air that powers the engine, reducing noxious exhaust. The liberal rules irked ecologically strict West Germany, which circumvented the EC -- and infuriated small-car producers -- by offering tax breaks that enticed customers to buy autos equipped with sophisticated pollution equipment. But the bombshell hit last June. Pressured by the Germans and the rising power of the Greens, the EC stunned the industry by imposing U.S.-style standards on all European cars by 1993. The impact is enormous. The new standards will force automakers to equip all cars with expensive three-way catalytic converters that reduce emissions of hydrocarbons, carbon monoxide, and nitrogen oxides. The cars will also need fuel-injection systems: The converters work only with injectors, which feed the engine with precisely mixed doses of gasoline. Both are standard in the U.S. But of the ten million gasoline-engine cars made last year in Europe, fewer than three million had catalytic converters and fewer than four million had fuel injection. The new rules are a blow to makers of small cars -- not only Fiat of Italy and Renault and Peugeot of France, but Ford and GM as well. Of the two, GM is in the stronger position. Ford has been spending heavily on lean-burn engines, while GM, anticipating the eventual adoption of U.S.-style standards, has been developing catalytic converters based on its American technology. This means good business for producers of auto emissions equipment. A subsidiary of Allied-Signal, the U.S. company, is building a plant in northern France to supply the platinum- and rhodium-coated cylinders that provide the catalyst for the converters. The biggest beneficiary is Robert Bosch of West Germany, the world's largest manufacturer of fuel injectors. Bosch (1988 sales: $15.7 billion) owes its success to technical prowess and staunch independence. Founder Robert Bosch developed the first auto ignition system. When he died in 1942, he left the bulk of his shares to a foundation, stipulating that it run hospitals and promote understanding among nations but have no say in the day-to-day management of the company. Free from shareholder pressure, Bosch has always spent heavily to create new products and keep its technological edge. This year, stimulated by the Green movement, it has increased capital-spending projections three times. By 1994 the company plans to spend more than $500 million to expand plants in Germany, France, and Belgium. The environmental movement is clouding the future of two of Europe's most exciting businesses, soft drinks and the disposable packaging that holds them, chiefly cans and plastic bottles. Because throwaway containers add to the mountain of household waste cramming Europe's landfills, the Greens have begun a vigorous campaign against them. Local beverage companies, which use refillable bottles, are marching with the Greens. The battle could be crucial for Coke, Pepsi, and other soft drink companies that regard Europe as a huge growth market. The average European drinks only about 15 gallons of carbonated soft drinks a year, compared with more than 50 gallons for the average U.S. consumer. But Europeans are getting thirstier. In Britain soft drink sales -- including mineral water -- are expected to jump more than 15% this year to $6.1 billion. According to French aluminum and packaging producer Pechiney, Europe's $2.5 billion market for beverage cans should grow 11% a year in the 1990s, double the rate in the U.S. - Coca-Cola wants to cut costs -- and prices -- by generating new economies of scale in filling and distribution. Says John W. Georgas, president of Coca- Cola's international soft drink sector: ''Our product is very price elastic. Lower prices will tremendously increase sales.'' Coke is relying on the same ''convenience packaging'' it uses in megaplants all over the world: tin and aluminum cans and plastic bottles, which are cheaper, lighter, and easier to transport than glass bottles. In Britain more than 90% of all soft drinks now come in cans or plastic bottles. Convenience packaging also dominates the soft drink market in France, Italy, and Spain. But in West Germany, Denmark, Switzerland, and the Netherlands most beverages still come in reusable glass bottles. West Germany and Switzerland are crowded with small brewers and soft drink manufacturers, as well as local grocery stores that collect and return bottles to the local plants. West Germany has no fewer than 1,100 brewers, many of which also produce soft drinks and mineral water. Germans guzzle dozens of colas, most of them regional or local brands. This fragmented market would offer a great opportunity for the big international beverage companies were it not for the increasingly effective alliance between the Greens and local bottlers. Reportedly under pressure from local brewers (though they deny it), Denmark has banned all disposable cans for beer, mineral water, and soft drinks. West Germany recently passed a law that greatly restricts use of plastic beverage containers by imposing a 25- cent deposit on each bottle, and has proposed a quota system to limit production of disposable packaging to 20% of the soft drink market and 10% for beer. SO FAR, SUCH RULES have proven immune to the European Community's new spirit of free trade. Last year the EC sued Denmark in the European Court of Justice in Luxembourg for restraint of trade. But the court ruled in Denmark's favor, stating that a country has the right to block free trade on environmental grounds. Disposable packaging's answer to the refillable bottle is the aluminum can, which so far has not been popular in Europe. Last year just seven billion were sold, vs. 78 billion in the U.S. But the Green movement -- coupled with the shift to convenience packaging -- is giving aluminum a lift. Unlike glass and its other rival, tin, aluminum is 100% recyclable. And its high scrap value encourages scrap dealers, municipalities, and charities to collect discarded cans. Sweden recycles 80% to 85% of its aluminum cans, the highest rate in the world. Aluminum supporters hope the Swedish success will help establish the metal as the Green package that's also economically efficient. Born in West Germany in the early 1980s, the Green consumer movement has transformed the Hausfrau's buying habits. Shoppers now show a strong preference for the 3,000 products ranging from batteries to shampoo stamped with the Blue Angel, an insignia awarded to environmentally friendly products by the government's Federal Environmental Agency. The Green fervor is spreading to Britain, propelled by the phenomenal success of marketing consultant John Elkington's Green Consumer Guide, a survey of ecologically safe consumer products. The guide has spent more than nine months on the London Sunday Times best-seller list, including a week as No. 1. With such a broad consensus among politicians and ordinary Europeans, the Green movement is here to stay. Companies that profit from the movement get a direct benefit. Those that pay a heftier share of the cost at least have the consolation of living in a cleaner land.