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Three Dimensions of Green Industrial Policy in the Context of Climate Change and Sustainable Development

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Abstract

Climate change has taken an increasingly important space in the development agenda. However, whether most countries can meet the challenge of mitigating climate change while simultaneously ensuring growth and poverty reduction remains debatable. This research contributes to the growing literature at the intersection of environment sustainability and economic/industrial development by identifying three dimensions of Green Industrial Policy (GIP), which rely on different approaches to mitigate climate change. Those three dimensions are (i) the consumption-centred dimension; (ii) the firm-level sustainability dimension, and (iii) the productionist innovation-driven dimension. This paper then applies this green industrial policy framework and examines the implications of pursuing different levels of GIP by drawing on a country case study (Ecuador). Two main findings arise from this study. First, a greener consumption is necessary but can hardly be achieved without industrial policies to stimulate green manufacturing and low-carbon innovation. Green industrial policy, therefore, has a central role to play in the structural transformation towards a low-carbon future. Second, a holistic and complementary approach is needed across the three dimensions of green industrial policy to ensure a coherent and developmental transition towards a low-carbon economy.

Résumé

Le changement climatique occupe une place de plus en plus importante dans le programme du développement international. Cependant, la plupart des pays peuvent-ils relever le défi de l'atténuation du changement climatique tout en assurant simultanément la croissance et la réduction de la pauvreté? Cela reste discutable. Cette étude contribue à la littérature croissante et se situe au croisement entre durabilité environnementale et du développement économique / industriel en identifiant trois dimensions de la politique industrielle écologique (PIE), qui reposent sur différentes approches pour atténuer le changement climatique. Ces trois dimensions sont: (i) la dimension centrée sur la consommation; (ii) la dimension de durabilité au niveau de l'entreprise, (iii) la dimension productiviste axée sur l'innovation. Cet article applique ensuite ce cadre de politique industrielle écologique et examine quelles sont les implications de la poursuite de différents niveaux de cette politique en s'appuyant sur l’étude de cas d’un pays (l’Équateur). Deux résultats principaux ressortent de cette étude. Premièrement, une consommation plus verte est nécessaire mais il est difficile d’atteindre ce but sans des politiques industrielles visant à stimuler la fabrication écologique et l'innovation à faible émission de carbone. La politique industrielle écologique a donc un rôle central à jouer dans la transformation structurelle vers un avenir sobre en carbone. Deuxièmement, il faut adopter une approche holistique et complémentaire dans les trois dimensions de la politique industrielle écologique pour assurer une transition cohérente et évolutive vers une économie sobre en carbone.

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Fig. 1

Source: Authors’ based on data provided by IRENA (2016)

Fig. 2

Source: Authors’ based on data provided

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Notes

  1. In order to achieve the international target of avoiding a more than 2C increase in global temperature, the world must achieve zero net emissions (IPCC 2015).

  2. In other words, “global warming is the quintessential global pure public good because each country’s release of GHGs augments the world’s atmospheric stock in an additive fashion and each country’s cutback results in a greater cost than benefit for that country unless assurances can be given that a sufficient number of action will act” (Sandler 1998, p. 225).

  3. The Kaya identity bears the name of the Japanese energy economist Yoichi Kaya that introduced it in 1990. The identity states that GHG emissions can be expressed as the products of population, GDP per capita, energy use per GDP and carbon intensity (measured through emissions per unity of energy consumed).

  4. According to the US Department of Energy (2015:1), the term industrial energy efficiency stands for “the energy efficiency derived from commercial technologies and measures to improve energy efficiency or to generate or transmit electric power and heat, including electric motor efficiency improvements, demand response, direct or indirect combined heat and power, and waste heat recovery”.

  5. CO2 intensity can be defined as the average emission rate of a given pollutant from a given source relative to the intensity of a specific activity (World Bank Glossary definition).

  6. The production of electric batteries may be carbon intensive, but their diffusion and use enable to reduce CO2 emissions on the long term, as it provides an alternative to conventional vehicles (as long as clean energies constitute the main source of electricity generation for charging electric batteries). The reverse is also true. The so-called green technologies may involve low-carbon consumption, but their production processes may be so carbon intensive that it offsets the low-carbon benefits of their usage.

  7. The Clean Energy Patent Growth Index (CEPGI) also shows that between 2002 and 2015, the top clean energy patenting companies (General Motors, Toyota, Honda, General Electric, Samsung, Ford, Hyundai and Nissan) have been concentrated in only a few industrialized economies. Indeed, referring to the US Clean Energy Patents (patents filed in the US), 46% of the patents filed in the US were granted to US applicants, 23% to Japanese, 8% to German, 7% to South Korean, and 3% to Taiwan.

  8. Weitzman (2007) further argues that high carbon prices “would do more to unleash the decentralized power of capitalistic American inventive genius on the problem of researching, developing, and finally investing in economically efficient carbon-avoiding alternative technologies than all of the piecemeal command-and-control standards and patchwork subsidies making the rounds in Washington these days”.

  9. A REC is created for every megawatt hour of renewable electricity generated and delivered to the utility grid, and it generally includes the following: type of renewable resource, location of renewable resource, date stamp or vintage of generation, emissions profile of the generating resource, and unique identification number (Critchfield 2015). The concept refers to the fact that when the power provider fed the energy into the grid, he receives a REC that can be sold in the market as an energy commodity (see Holt and Bird, 2005).

  10. Between 2007 and 2012, actual emissions subject to a carbon tax increased and continued to increase during the next five years while the tax rate was constant (Murray and Rivers, 2015; Haites et al., 2018).

  11. Here, the principal-agent problem stems from the fact that those who are responsible for installing—or covering the costs of installing—energy efficient solutions (e.g. landlords or buildings) may not act in the interest of those who may benefit from energy efficiency solutions (e.g. tenants benefiting from lower energy bills, or society as a whole benefiting for lower CO2 emissions). This departure of the principal’s interest from the agent’s interest constitutes an “agency cost”.

  12. See Schröder et al. (2020) for an investigation of circular economy initiatives in Latin America.

  13. Mealy and Teytelboym (2019:4) further show that “countries that currently export a significant number of green complex products are well placed to diversify into other green complex products in the futures”.

  14. Brazil and China and Brazil tend to be particularly competitive in industries with green innovation in contrast to most other developing nations (Fankhauser et al. 2019). China has indeed become the global leader in the production of photovoltaic, wind, and solar thermal heating technologies, while Brazil has become the second largest producer of liquid biofuels for transport (after starting the industry in the 1960s).

  15. The information presented in this section was gathered through two interviews with ST employees in July 2017 and October 2019, and through detailed documents available in the company website https://sauletech.com/

  16. Perovskite Solar Cells (PSCs) belong to the third generation of photovoltaic technologies, whose production is much cheaper when compared to conventional silicon photovoltaics. Three main characteristics sparked the interest over this technology: its potential to be low processing costs, the mechanical properties that enable to fabricate perovskite on cheaper and more flexible types of materials, and the peculiarities of its value chain which is shorter (Song, 2017; Anzolin and Righetto, 2017; EPKI, 2019).

  17. Pegels and Altenburg (2020) also point out that the literature on green industrial development has been biased towards developed countries and has mostly ignored developing ones.

  18. One line of argument emphasizes the fact that late industrializers, which may feature low levels energy access can benefit by directly leapfrogging towards renewable energies, while early industrializers have to bear the cost of retrofitting and reconversion of the electricity grid towards renewable energies (Batinge et al. 2017; The Economist, 2017).

  19. Semieniuk and Mazzucato (2019) have indeed shown that public financing was central in national energy transitions, such as in Iceland (from fossil to geothermal energy), Norway (to hydroelectricity), France (from oil to nuclear), and the United States (from conventional to shale gas).

  20. There are other examples of 1st level GIP (such as the mandatory control of efficient exhaustion pipes for vehicles) cannot be further analysed in this paper due to space constraints. Overall, those examples also show that consumer behaviour is not likely to change through regulations if the cost of transition remains too high for consumers.

  21. One further interesting point is that the success of efficient cooking programmes relies on the availability of reliable power supply during cooking time (Banerjee et al. 2016; Martinez-Gomez et al. 2017). In that context, because the implementation of the NECP led to an anticipated increase in electricity demand, the government has invested over USD11 billion in a new hydroelectric power station, a new electric transmission grid, and distribution infrastructure (Martinez-Gomez et al. 2017). Those investments, further discussed in Sect. 4.1.2, reveal the need for complementarity across the different green policy dimensions.

  22. While jobs in construction services of renewable energy plants are typically generated locally, their duration may be significantly lower than jobs in manufacturing, R&D, and innovation, which is why technological dependence may become an obstacle to unleashing the wider socioeconomic benefits of energy transition (IRENA, 2020).

  23. CONELEC 001/13 established that 100% of non-qualified personnel and 50% of technical staff (not including administrative staff) during construction and operation of renewable energy projects must be Ecuadorian (IRENA 2015).

  24. The IIGE was created in 2018 from the merger of two institutes (INIGEMM and INER) that were, respectively, created in 2009 and 2012.

  25. This perspective became integral part of the agenda of international institutions such as the OECD, the World Bank and the United Nations Environment Program, with each of them publishing flagship reports on green growth (Hickel and Kallis 2019).

  26. Even in the case of India, Behuria (2020) argues that the country’s position as a late, late industrializer in the renewable energy sector, combined with prevailing domestic political economy pressures, have made it extremely difficult to promote the manufacturing of solar panels and cells.

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Acknowledgements

The authors would like to thank Ha-Joon Chang, Kathy Hochstetler, Roger Fouquet, Jostein Hauge, James Putzel, Florian Schaeffler, Ben Radley, David Leal, Carlos López-Gómez, Andres Mejía-Acosta, Teddy Brett, and Jennifer Castaneda-Navarrete for their helpful comments on earlier drafts of this paper. We also thank the participants of the EAEPE annual conference and the UNCTAD 2019 workshop on the Global Green New Deal, for insightful discussions and comments. Special thanks also go to David Delgado for his valuable support during fieldwork in Ecuador and to David Forgacs from Saule Technologies. We are also grateful to all public officials, business executives, civil society members, and scholars for sharing their insights and time during fieldwork interviews. Any remaining errors are our sole responsibility. This research has been partly supported by a research award from the Mohammed Bin Rashid Initiative for Global Prosperity and the Institute for Manufacturing (University of Cambridge).

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  1. University of Urbino, Urbino, Italy

    Guendalina Anzolin

  2. University College London, London, UK

    Guendalina Anzolin

  3. London School of Economics and Political Science, London, UK

    Amir Lebdioui

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Both authors contributed to the conceptual framework of this article. AL conducted fieldwork in Ecuador and GA conducted fieldwork interviews on the Polish perovskite sector. AL obtained the funding for this research.

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Correspondence to Amir Lebdioui.

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Anzolin, G., Lebdioui, A. Three Dimensions of Green Industrial Policy in the Context of Climate Change and Sustainable Development. Eur J Dev Res 33, 371–405 (2021). https://doi.org/10.1057/s41287-021-00365-5

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