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Green industrial policies : when and how

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Author Info

  • Hallegatte, Stephane
  • Fay, Marianne
  • Vogt-Schilb, Adrien

Abstract

Green industrial policies can be defined as industrial policies with an environmental goal -- or more precisely, as sector-targeted policies that affect the economic production structure with the aim of generating environmental benefits. This paper provides a framework to assess their desirability depending on the effectiveness and political acceptability of price instruments. The main messages are the following. (i) Greening growth processes to the extent and with the speed needed cannot be done without industrial policies, even if prices can be adjusted to reflect environmental objectives. (ii)"Sunrise"green industrial policies are needed because they support the development of critical new technologies and sectors, bring down costs, and allow for reduced emissions in the short term even in the absence of carbon pricing. (iii)"Sunset"green industrial policies and trade policies may be needed in conjunction with safety nets to make carbon pricing politically or socially acceptable. They can help mitigate the impact of a carbon price on competitiveness and unemployment and smooth the transition by helping industries adjust to the new conditions. (iv) Green or not, industrial policy requires carefully navigating the twin dangers of market and governance failure. The viability of supported technologies and sectors is difficult to assess through a market-test given their dependence on continued environmental policies or pricing -- such as a carbon price. Particular attention must be paid to avoid potential unintended negative effects, such as rebound effects (especially if prices are inappropriate), misallocation of capital, or capture and rent-seeking behaviors.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6677.

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Date of creation: 01 Oct 2013
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Handle: RePEc:wbk:wbrwps:6677

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Related research

Keywords: Climate Change Economics; Transport Economics Policy&Planning; Climate Change Mitigation and Green House Gases; Economic Theory&Research; Labor Policies;

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References

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Cited by:
  1. Julie Rozenberg & Adrien Vogt-Schilb & Stephane Hallegatte, 2013. "Efficiency and Acceptability of Climate Policies: Race Against the Lock-ins," Review of Environment, Energy and Economics - Re3, Fondazione Eni Enrico Mattei, November.
  2. Adrien Vogt-Schilb & Stéphane Hallegatte, 2013. "Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures," Working Papers 2013.89, Fondazione Eni Enrico Mattei.
  3. Adrien Vogt-Schilb & Stéphane Hallegatte, 2013. "Marginal abatement cost curves and the optimal timing of mitigation measures," Working Papers hal-00916328, HAL.

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