From low-wattage light bulbs to carbon-neutral mortgages, from farmers' markets to the boardrooms of the world's biggest companies, green business has become big business.

The scale of growth and business opportunity is clear: global sales of "environmental industries" are estimated at US$550 billion ($702 billion) - as big as aerospace or pharmaceuticals. Shell has forecast that the climate change market in the UK - including areas such as building regulations, energy efficiency, renewable electricity and biofuels - will grow to £2.8 billion ($7.05 billion) this year.

But as headlines turn from green profits to big banking losses, questions are being raised about whether an economic slowdown will depress rapid growth in low-carbon business.

There was a nervy response to Shell's decision this month to pull out of the giant London Array wind farm, although the company insisted it was a business decision and not down to dwindling interest in renewable energy.

The risk that a recession will hold back environmental investment trends seems obvious, as consumers and companies look to save costs and become more risk-averse, especially since many corporate commitments are voluntary.

"When there is a slowdown, we realise how important it is to have high environmental standards underpinned by regulation," says Peter Young, chairman of the Aldersgate Group, which lobbies for tougher environmental standards.

There is also a greater risk that politicians will run scared from stiffer regulation or higher taxes, even though some measures would help businesses to ride the downturn by cutting costs, says Young.

Nevertheless, many organisations deny a recession would dent the sustainable business agenda.

The Environmental Industries Commission says it stands by forecasts that the sector will grow, from US$500 billion in 2005, to US$700 billion by 2010; Ceres, a powerful US-based coalition of investors, says it is confident of meeting a promise by members to raise investment in clean energy from US$2 billion to US$10 billion by the end of the decade (out of a total US$5000 billion under management); and JP Morgan, which has just bought UK-based carbon-offset pioneer Climate Care, says it believes the carbon-offset market is set to grow from US$60 billion to US$70 billion last year to US$500 billion by 2010 and US$1000 billion by 2020.

US-based Cambridge Energy Research Associates recently surveyed the global market for clean energy and biofuels before asking the recession question.

Assuming current rates of economic growth, it estimated clean energy - from wind farms to nuclear generation - would grow from 3 per cent to 16 per cent of global capacity by 2030, and biofuel input would increase from 2 per cent to 16 per cent; together they would accumulate investment of US$7000 billion. If there were a "multi-year" economic slump, growth would be dramatically reduced, they reckoned, but still more than double from 3 per cent to 7 per cent, albeit with no growth in biofuels.

All such bullish predictions are based on a convergence of issues.

"We focus on the climate-change driver, but we recognise there are other significant drivers, like high oil prices and a lot of push towards energy security," says Dan Bakal, Ceres' director of electric power programmes.

The main factor is climate change or, more specifically, growing regulation to curb emissions of greenhouse gases.

"The preponderance of political, popular and scientific opinion, which has converged over the last year or so, is that it seems extremely likely that action will be taken regardless of a recession," says Blythe Masters, head of global commodities at JP Morgan.

"Personally I don't think the recession is an issue at all. Recessions will come and go, but the environmental reality is upon us whether we like it or not."

The effect of a recession on fuel prices is less clear. In the short term, population growth and accelerating incomes in developing countries like China should offset any fall in demand, keeping prices high and bolstering the incentive to invest in energy efficiency, says Bakal.

Longer term, conventional wisdom says that if the economy contracts, energy demand and therefore fuel prices will fall, reducing pressure on businesses to invest in efficiency or alternative energy - or on governments to insist upon it.

Masters, however, believes otherwise: "If energy prices are low, it may be that people's ability to absorb higher costs is more than it would otherwise have been."

A prop for ethical retail businesses is that their customers tend to be more loyal than shoppers who focus on cost.

This is a small, if fast-growing, niche: last year the Co-operative Bank estimated spending on ethical goods in the UK - from Fairtrade to local sourcing - had doubled in five years to £32.3 billion, but it was still only just over 5 per cent of household spending.

There are some who argue that green businesses will thrive in a recession. In economic downturns, central banks tend to cut interest rates to stimulate the economy.

This could favour clean-energy producers, who need to borrow more to build the new infrastructure, but then often run them on "free" natural resources, such as wind, sun and tides, says Bakal.

Governments could also respond by creating jobs in sectors such as home energy insulation, says Bakal, or by reforming energy subsidies, which tend to penalise poorer people, and thus level the playing field for ethical and environmental businesses, says Andrew Simms, policy director of the New Economics Foundation.