Green exports and the global product space: Prospects for EU industrial policy
AbstractWe test if and where industrial policy to promote â??greenâ?? industry development can improve competitiveness in export markets. Proponents of â??green growthâ?? have argued that domestic promotion of â??greenâ?? energy will generate improved comparative advantage in export markets for high-technology goods such as wind turbines or solar cells. If this holds depends on if domestic market expansion can, on its own, support firm competitiveness abroad. We find evidence that industrial policy may work for wind turbines, but we find no evidence that it works for solar cells. Furthermore, domestic renewable energy promotion is more likely to translate into improved international competitiveness if a country already possesses skills, technologies, and industrial sectors closely related to the sector in question. By locating the wind turbine and solar cell sectors in the global product space of traded goods, we are able to show that, net of historical competitiveness and domestic market size, green industrial policy functions best when capitalising on pre-existing industrial capacities, rather than trying to create them. Finally, our finding that policy appears to work for wind turbines but not solar cells may reflect the greater tradeability of solar cells, which may mean that expansion of domestic demand leads to more imports rather than expanded domestic production. While this paper suggests conditions under which green industrial policy might prove effective in economic development, it makes no claims about whether this represents an efficient approach to either growth or emissions reduction. This evidence recommends caution in using economic growth and competitiveness arguments as the primary justification for investments in renewable energy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bruegel in its series Working Papers with number 556.
Date of creation: May 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-30 (All new papers)
- NEP-ENE-2011-05-30 (Energy Economics)
- NEP-ENV-2011-05-30 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- de Melo, Jaime & Robinson, Sherman, 1990. "Productivity and externalities : models of export led growth," Policy Research Working Paper Series 387, The World Bank.
- Rodriguez-Clare, Andres, 2007.
"Clusters and comparative advantage: Implications for industrial policy,"
Journal of Development Economics,
Elsevier, vol. 82(1), pages 43-57, January.
- Andrés Rodríguez-Clare, 2005. "Clusters and Comparative Advantage: Implications for Industrial Policy," Research Department Publications 4391, Inter-American Development Bank, Research Department.
- Spencer, Thomas & Lucas, Chancel & Emmanuel, Guerin, 2012. "Exiting the crisis in the right direction: A sustainable and shared prosperity plan for Europe," MPRA Paper 38802, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruegel).
If references are entirely missing, you can add them using this form.