Green Industrial Policy Research Articles

How does green industrial policy affect corporate green innovation? Evidence from the green factory identification in China

How does green industrial policy affect corporate green innovation? Evidence from the green factory identification in China

Levelling up as green industrial policy

ABSTRACT The emergence of green industrial policy globally signals a growing awareness of climate action as central to policies that address regional economic disparities. In the UK, the newly elected Labour government’s economic vision of ‘securonomics’ corresponds with such an approach: positioning net zero as a key policy goal and the next terrain of ‘levelling up’ in the UK. Any green industrial policy in the UK will be place-based: with net zero both enabling and complicating how economic policy takes shape in regional and local contexts. This commentary highlights the key spaces in which net zero will take shape across the UK, with different communities experiencing processes of deindustrialisation or reindustrialisation as sectors decline and emerge. In advocating for a place-sensitive green industrial policy, it details how green jobs and skills will play a key role in any future just transition. With the regional geographies of net zero already taking shape, it highlights that climate action will be linked to patterns of emergence, change and decline that inscribe regional economies with new vulnerabilities, tensions and futures.

The role of geographic distances in green industrial pilot policies evaluation: A sustainability transition perspective.

Green industrial policies (GIPs) aim to promote the adoption ofgreen technology within a sustainability framework. While previous evaluations of GIP have focused more on the policy itself and the impacts within the policy boundaries, this paper further introduces the geographical factor to analyze the impact of different spatial geographic distances on implementing GIP. By integrating geographic distances into a spatial difference-in-differences analysis to assess the effects of municipal green industry policies (referred to as green industry pilot policies in this paper) enacted in 11 cities in China from 2006 to 2010, we find that these policies not only improve environmental and economic outcomes in targeted regions but also have spillover effects that may affect neighboring areas negatively, highlighting the importance of geographic considerations. The effectiveness of green industrial policies varies across cities, influenced by local socio-technical systems and regional characteristics such as infrastructure and information technology. These findings suggest that policy impacts are complex and multifaceted, requiring a comprehensive understanding of geographic interdependencies. By incorporating geographic factors, this research contributes to sustainability transition theory by offering insights into the spatial and temporal dynamics of socio-technical systems. The results underscore the need for policymakers to consider spatial-temporal aspects and potential secondary effects on adjacent regions when designing and implementing green industrial policies.

Who drives the green shift? EV and battery policymaking and systemic marginalisation of auto suppliers in South Korea

The swift global transition to electric vehicles (EV) and batteries in the automotive industry highlights the nature of governments’ efforts towards a green economy, marking a transition from environmental regulations to industrial policies. This shift has led to renewed interest in industrial policies, especially in East Asian developmental states, like South Korea. The EV and battery industries in South Korea have grown rapidly along with the government's efforts to mobilise the entire economy through aggressive green industrial policy, particularly during the Lee Myung-bak administration (2008–2012). Big Korean automobile and electronics manufacturers have participated directly in setting the country's industrial agenda, leading the green industrial policy with their business interests. However, the process of EV and battery policymaking also marginalized auto suppliers in the existing manufacturing sector from agenda setting. Focusing on business’ structural power, this paper explains how big business elites systematically alienate small and medium-sized suppliers from the new growth policy thanks to their strong information monopoly in the hierarchical structure of production in the automobile industry and EV policies in South Korea.

Captured green aims: The case of Hungary

The article aims to shed light on the environmental risks of the Hungarian autocratic economic policy coupled with increased state interventionism and the revival of industrial policies. Green economic strategies proliferate in democratic countries, but we know less about contemporary hybrid regimes. In the case of Hungary, we show that the pillars of green industrial policy do not exist in practice. There is however a façade and rhetoric of green aims which serve only as one tool among others to rent-seeking and keep the ruling power. By several illustrative cases, we describe the mechanisms of hollowing out, capturing environmental institutions, instrumentalising green aims and repressing civil initiatives as systemic characteristics for illiberal hybrid regimes.

Strategic foresight as a beacon for the new EU industrial policy

AbstractThis article assesses the impact of strategic foresight in shaping the European Commission’s new industrial policy. It argues that, since it was introduced by President von der Leyen as a political portfolio, foresight has contributed to mainstreaming the concepts of ‘resilience’ and ‘open strategic autonomy’ into the EU's industrial strategy, via the Strategic Foresight Reports and new participatory structures inside and outside the Commission. This responded to the need for building up preparedness in the face of ‘radical uncertainty’ on future supply chain disruptions. We conclude that strategic foresight—if supported by an effective governance—will play an increasingly large role in shaping the EU's future policymaking. In particular, the concepts of ‘competitive sustainability’ and people's wellbeing, advanced by the 2023 Strategic Foresight Report as pillars of open strategic autonomy, may help futureproof the EU's green industrial policy going forward.

Green industrial policy for climate action in the basic materials industry

Historically, the basic materials industry has had relatively low R&D expenditure levels, raising concerns about meeting 2050 climate targets given the crucial need for innovation and technology advancement in this industry. Decisive government intervention and active support for key technological pathways are required to address significant market failures and catalyse industrial decarbonisation. This Essay lays out the economic justification for an active green industrial policy and proposes key policy design principles, with the aim of striking a balance between facilitating the green industrial transition and maintaining cost efficiency in meeting climate targets.

Polluting industries: Does green industrial policy encourage green innovation? Chinese perspective evidence

This study investigates the efficacy of green industrial policies in stimulating green innovation within China's polluting industries, over the period 2011–2022. Focusing on 30 provinces, we assess the dynamic relationship between green industrial policy implementation and innovation in environmentally detrimental sectors. Employing Difference-in-Differences (DID) and Propensity Score Matching DID (PSM-DID) models, we analyze comprehensive provincial-level data to quantify the impact of policy measures on green technological advancements. The results reveal a significant positive correlation between green industrial policies and the rate of green innovation, particularly in regions with higher pollution levels. These findings suggest that well-structured green industrial policies can serve as effective catalysts for fostering sustainable technological innovations in polluting industries. Policy implications highlight the necessity of targeted, region-specific approaches to maximize the potential of green industrial policies in promoting environmental sustainability and economic growth.

Effect of green industrial policy on China's outward renewable energy investment

The urgent need to accelerate global decarbonization to mitigate against climate change has revitalized the role of industrial policy in a country's economic transformation. This paper focuses on the impact of green industrial policies on China's renewable energy investment overseas. Findings indicate a strong relationship with consistent significant effect across renewable energy sectors, heterogeneous host countries, and firm ownership. Green industrial policies compensate for impoverished investment environments by signaling host governments' commitment to energy transition and decarbonization. This attenuates risk and uncertainty and has a positive effect on renewable energy investment from China. Such investment is especially relevant for developing countries interested in participating in energy transition. China's investment potentially increases access to renewable energy that facilitates global decarbonization.

Explaining green industrial policy in an age of globalization

Explaining green industrial policy in an age of globalization

Green industrial policy can strengthen carbon pricing but not replace it

Carbon pricing has received prominent support as the key policy to reduce greenhouse gas emissions. Yet, in the context of heightened geopolitical tensions and risks of supply chain disruptions, policy makers are increasingly resorting to green industrial policies to support the deployment of clean energy technologies. This Perspective discusses whether this development represents a paradigm shift in the design of climate policies and assesses arguments for and against carbon pricing and green industrial policies. Our analysis addresses implications for economic efficiency, security of supply, distributional concerns and political economy issues. We find that green industrial policies can support carbon pricing by lowering market barriers for clean technology diffusion and strengthening political support for climate policy. Yet, we also emphasize that a carbon price should be an essential element in any effective climate mitigation policy mix and the key is to find the optimal policy mix for carbon pricing and green industrial policies for the unique context of each location. In the EU, green industrial policy should mainly be employed to complement carbon pricing and deal with additional market barriers. In the US, by contrast, green industrial policy could be used strategically to try to build political support for and reduce resistance to a carbon price.

Domestic renewable energy industries and national decarbonization policy

Does the growth of renewable energy industries catalyze national decarbonization policy? The idea that stronger domestic renewable energy industries increase the political feasibility of stringent energy and climate policies aiming to phase out fossil fuels has been championed by proponents of policy sequencing and underpins the global pivot to green industrial policy. Yet, the conditions necessary for such an effect to materialize have not been fully spelled out and its empirical veracity not been systematically scrutinized. This paper contends that the willingness and ability of renewable energy industries to influence policy should be weaker for fossil fuel phaseout policies compared to green industrial policies because of more diffuse material interests, less access to policymaking, and stronger countermobilization. The first large-scale investigation of this relation using extensive time-series cross-sectional data provides no evidence of a systematic positive effect of renewable energy industry strength on carbon pricing or fossil fuel subsidy phaseouts. These findings challenge the widespread argument that the emergence of domestic low-carbon industries translates into more ambitious decarbonization policy. Scholars and policymakers should scrutinize the mechanisms and scope conditions underlying this assumed relationship.

Responding to the EU Green Deal: A Proactive Approach to Trade and Green Industrial Policy in Africa

Responding to the EU Green Deal: A Proactive Approach to Trade and Green Industrial Policy in Africa

Sustainable futures: Toward institutionalizing green industrial policy

AbstractAlthough there have been substantial accomplishments in understanding environmental sustainability policy, there remains a paucity of research categorizing the mechanisms through which firm ownership architectures can be harnessed to advance green industrial policy (GIP). The purpose of this study is to examine how different types of ownership structures can be utilized as mechanisms for capitalizing on and championing GIP. By integrating the fragmented streams of research, this study advances a four‐cell typology of GIP‐firm ownership dimensions (privately‐owned enterprises (POEs)/state‐owned enterprises (SOEs) × intra‐country/inter‐country GIP), which sheds much‐needed light on the long‐term energy transition (ETs) pathway through institutional and industrial challenges. The analysis further enhances researchers' understanding of leveraging SOEs and POEs to neutralize uncertainties inherent in scaling up renewables and addressing the “pollution haven hypothesis.” Directions for future research pertaining to ETs are outlined.

Hydrogen infrastructure modeling in macro-energy systems models - Lessons learned, best practices, and potential next steps (workshop insights)

This short communication is based on a workshop on hydrogen network modeling in macro-energy system models discussing the whole hydrogen value chain: production, transmission, storage, and use, as well as the related issues of demand flexibility, alternative fuels of biological origin, and the integration with district heating. It was organized by the Danish research network ENERforsk with leading modelers from academia, industry, and transmission system operators. The workshop collected (1) lessons learned, (2) best practices, and (3) potential next steps. We conclude that no-regret pathways need to consider evolving hydrogen regulation while balancing social aspects with interests driven by green industrial policy. Important and uncertain issues include the repurposing of natural gas networks, considering hydrogen pipeline standards and existing contracts, or the disposal of brine water. As more demand sectors and carbonaceous fuels are included in the models, carbon management, sustainable biomass, and carbon networks become more important. Collecting and incorporating lessons learned, best practices, and potential next steps will help the modeling community and policymakers to develop sound policies.

A Very British industrial policy: Green finance and the City-Bank-Treasury control of Net Zero

In 2017, the UK’s Industrial Strategy was thought to have marked an unconventional moment in British politics, as the state began to explicitly ‘pick the winners’ necessary to both grow and decarbonise the economy. This article demonstrates that a more conventional view of this moment can be found in the pages of the Green Finance Strategies where, contrary to the assumption that a green transformation requires developing domestic capacity in emergent technologies, the UK has instead chosen to be the financier of them. It draws on a novel dataset to find another instance of ‘Treasury Control’, in which large scale investments in low carbon sectors was eschewed to instead 'green' the financial expertise located in the City of London, thereby making green finance British industrial policy. Instead of any industrial transformation of the UK political economy, the pursuit of green finance belies the fact that any such transition, and by extension Net Zero, is shaped by the City-Bank-Treasury nexus' desire to preserve the prevailing economic model with as few adjustments as possible.

Strategies of Green Industrial Policy: How States Position Firms in Global Supply Chains

The resurgence of industrial policymaking—particularly for emerging low-carbon industries—challenges social science theories that expect such interventions from centralized states or suggest that different kinds of states specialize in various forms of innovation policy. Interventionist forms of industrial policy have made a comeback among liberal economies. Coordinated economies now make use of market-driven strategies. This paper argues that the new generation of industrial strategies is shaped by the industrial development challenges that policymakers face at the sectoral level. It proposes a new theoretical framework that distinguishes between the policy orientation (targeted or open-ended) and the central agents driving financial and technological decision-making (governments or firms). We show that the choice of strategy is shaped by the level of uncertainty and the position of the domestic industry in global supply chains, that is, whether global supply chains are emerging or mature and whether the domestic industry is an entrant or incumbent.

The electric vehicle sector in Brazil, India, and South Africa: Are there green windows of opportunity?

Abstract The shift to electric mobility is driving disruptive transformations in the automotive sector worldwide. It poses significant but different opportunities and challenges to incumbents and latecomers at both the firm and country levels. China’s green industrial policy has facilitated its rapid catching up and even leapfrogging in some domains of electromobility. This article asks whether the exploitation of this window of opportunity can be replicated in other latecomer countries. Accordingly, it provides a comparative analysis of the automotive green window of opportunity in Brazil, India, and South Africa, three emerging economies with long established but structurally different automotive industries. To do so, it examines domestic preconditions, policy and enterprise responses, and preliminary industrial development outcomes. Although all the three countries face constraints in replicating China’s relative success, the article shows how green opportunities and threats are unequally divided between the three countries.

Renewable portfolio development in parallel with green industrial development policies towards the decarbonization targets of industrial gas producers in China

In order to reduce carbon emissions and promote the development of renewable energy in China, a tripartite evolutionary game model of the government, industrial gas producers (IGP) and power generation groups (PGG) is constructed by considering the policy mechanism of renewable portfolio standard (RPS) in parallel with industrial green development, and combining with the government's incentives and disincentives mechanism. Simulation analysis is carried out to explore the effects of different parameters on the cooperative transformation of enterprises under different governmental strategies. The results show that there is a mutual assistance mechanism between RPS and industrial green development, and the key lies in whether IGP and PGG can form a cooperative mechanism, while the government's incentives and disincentives mechanism is the key to promote the formation of cooperative mechanisms between the two parties. If the government adopts punitive measures, it should take into account the transformation costs of IGP and the scale of PGG, and if it adopts subsidy measures, it should give priority to helping enterprises with lower transformation costs, otherwise it will face greater financial pressure. The compatibility of IGP and PGG is the key to determining whether the two sides can realize the transformation.

Turning Point: Green Industrial Policy and the Future of U.S. Climate Action

In the first two years of the Biden presidency, Congress passed three massive funding bills, which poured hundreds of billions of dollars into clean energy infrastructure, research and development, and deployment of clean energy. Although these bills are not what lawyers are accustomed to thinking of as “environmental law,” they have the potential to launch a transformation of the energy sector. This development could not have come at a better time, given the Supreme Court’s increasingly skeptical attitude toward federal regulation. Although the direct effect of these laws will be dramatic, this Article focuses on positive feedback loops that will amplify those direct effects. These feedback loops operate via impacts on innovation, regulation, and politics, all of which lead to expanded use of clean energy at the expense of fossil fuels. In turn, these impacts expand the production and use of clean energy, closing the feedback loops. Taking full advantage of these dynamics will require a more coordinated government effort, and this Article discusses a coordination method pioneered by some states.