Green industrial policy: managing transformation under uncertainty

Green industrial policy: managing transformation under uncertainty

Download PDF 874 KB

Lütkenhorst, Wilfried / Tilman Altenburg / Anna Pegels / Georgeta Vidican
Discussion Paper 28/2014

Bonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

ISBN: 978-3-88985-653-1
Price: 6 €

This Discussion Paper presents a normative concept of green industrial policy, which is defined as encompassing any policy measure aimed at aligning the structure of a country’s economy with the needs of sustainable development within established planetary boundaries. The paper elaborates on the rationale of a green industrial policy, how it differs from conventional industrial policy, why it is faced with significantly bigger challenges, and how these can be met.

Production and consumption patterns today are largely shaped by markets. However, markets fail to solve many of the environmental challenges the world is facing. Therefore, governments have to intervene, thus reclaiming the primacy of public policy in setting and implementing societal objectives. While safeguarding the sustainability of human life on our planet makes green industrial policy a highly normative undertaking, there is also a strong economic case for green industrial policy – the success stories of such ‘green’ frontrunners as Germany and Denmark demonstrate the competitiveness potential of the new technologies. However, as shown by decades of discussion on industrial policy, government intervention almost invariably brings about risks of political capture and government failure. Green industrial policy is thus not only governed by ethical norms, but also by politics.

The risks of failure are magnified by the urgency and scale of today’s global environmental challenges, requiring particularly bold, comprehensive and well-orchestrated government intervention under high uncertainty. By highlighting lessons learned from practical cases of both success and failure, this paper shows how these risks can be, and have been, managed. This involves both the disruption of old pathways (with locked-in technologies and infrastructure as well as stranded assets) and the creation of new pathways responding to sustainability imperatives. The paper argues that a broad-based social vision needs to be forged – supported by change coalitions and coupled with policy process safeguards, openness to policy learning, and an alignment of green industrial policies with market mechanisms.

About the authors

Altenburg, Tilman

Economic Geographer

Altenburg

Pegels, Anna

Economist

Pegels

Further experts

Bauer, Steffen

Political scientist 

Brandi, Clara

Economist and Political Scientist 

Breuer, Anita

Political Scientist 

Haldenwang, Christian von

Political Scientist 

Horstmann, Britta

Geographer 

Houdret, Annabelle

Political Scientist 

Leininger, Julia

Political Scientist 

Mehl, Regine

Political Scientist 

Never, Babette

Political Scientist 

Pauw, Pieter

Environment Scientist 

Baumann, Max-Otto

Political Scientist 

Chan, Sander

Enviroment Policy 

Dick, Eva

Sociologist and Spatial Planner 

El-Haddad, Amirah

Economist 

Fuhrmann, Hanna

Economist 

Keil, Jonas

Economist 

Kuhn, Sascha

Social Psychologist 

Mathis, Okka Lou

Political Scientist 

Nguyen, Quynh

Political Scientist 

Nowack, Daniel

Political Scientist 

Reiners, Wulf

Political Scientist 

Malerba, Daniele

Economist 

Bencini, Jacopo

Environmental Researcher 

Iacobuta, Gabriela

Environmental Researcher