Climate change offers an opportunity to create an international market for green products, capital and goods through cooperation and collaboration
Growth, Employment and Climate Change, the trifecta of modern economic challenges, have rekindled the interest of policymakers in bringing back the craft of industrial policymaking right at the centre of the discussion table. Ominous estimates highlight climate change as a critical factor negatively impacting growth and employment, whereby ~ 18% of GDP and labour productivity equivalent to 72 million jobs might be lost, therefore the argument by Nicholas Stern and Joseph E. Stiglitz that “the only long-run growth trajectory is a green trajectory” echoes loudly for adaptation by Industrial policymakers globally. Fashionably rechristened as Green Industrial Policy, the craft embeds within itself a series of government intervention measures (supply and demand focussed subsidies, regulations, incentives and standards) that aim at achieving economic development while simultaneously cutting greenhouse gas emissions. Globally leading nations have combined different elements of the Green Industrial Policy craft for building national competitive advantage towards catalysing economic growth, increasing skilled employment and climate action:
Japan: Introduced five policy tools of Grant funding, Tax incentive, Guidance policy on transition finance, Regulatory reforms and international collaboration, targeting over 18 trillion yen for fourteen green growth sectors such as wind power, nuclear power, mobility & battery etc.
The US: manufacturing, strengthening national security through supply chain resilience and accelerating the energy transition by supply and demand side spending and tax cuts of ~$400 billion that aims to create ~1.5 million jobs. India has made some formidable moves towards a green future by focusing on domestic market formation and localization of components. Its Long Term-Low Emission Development Strategy submitted at COP27 articulates seven transitions to low-carbon development such as electricity systems, transport systems, sustainable urbanization etc.
The production-linked incentive schemes in renewable energy equipment space and technology-focused national missions on hydrogen and energy storage are steps in the right direction that can be aptly followed by a broader green industrialisation policy for India.
The broader green industrialisation policy by catalysing investments in manufacturing of decarbonisation technologies which are foundational in the short run can trigger the Schumpeterian process of innovation and discovery in the medium term towards high-carbon growth and employment. In this regard, the thrust on clean energy entrepreneurship through industrial policy and a green R & D policy can foster breakthrough innovations and patents that can create and monetise new solutions. Japan and Korea have acknowledged this potential of startups as open innovation resources and introduced industrial policy support that encourages them to partner with larger conglomerates to propel the innovativeness of the economy at large and compete with their European, Chinese and American competitors. Green startups with their agility and Conglomerates with their market power and experience can aspire to create our own green Silicon Valley. Climate change offers an opportunity to create an international market for green products, capital and goods through international cooperation and collaboration. These initiatives can catalyse a virtuous cycle of growth, employment and carbon neutrality.
(The writer is a Chevening Scholar and an International Development expert; views are personal)
