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Green exports and the global product space: Prospects for EU industrial policy

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  • Mark Huberty
  • Georg Zachmann

Abstract

We test if and where industrial policy to promote ‘green’ industry development can improve competitiveness in export markets. Proponents of ‘green growth’ have argued that domestic promotion of ‘green’ 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.

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  • Mark Huberty & Georg Zachmann, 2011. "Green exports and the global product space: Prospects for EU industrial policy," Working Papers 556, Bruegel.
  • Handle: RePEc:bre:wpaper:556
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    References listed on IDEAS

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    1. Rodriguez-Clare, Andres, 2007. "Clusters and comparative advantage: Implications for industrial policy," Journal of Development Economics, Elsevier, vol. 82(1), pages 43-57, January.
    2. Unruh, Gregory C., 2002. "Escaping carbon lock-in," Energy Policy, Elsevier, vol. 30(4), pages 317-325, March.
    3. Jaime de Melo & Sherman Robinson, 2015. "Productivity and externalities: models of export-led growth," World Scientific Book Chapters,in: Modeling Developing Countries' Policies in General Equilibrium, chapter 3, pages 43-70 World Scientific Publishing Co. Pte. Ltd..
    4. Unruh, Gregory C., 2000. "Understanding carbon lock-in," Energy Policy, Elsevier, vol. 28(12), pages 817-830, October.
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    Cited by:

    1. 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.
    2. Sahoo, Anshuman & Shrimali, Gireesh, 2013. "The effectiveness of domestic content criteria in India's Solar Mission," Energy Policy, Elsevier, vol. 62(C), pages 1470-1480.
    3. Moore, Winston, 2013. "An assessment of green export opportunities for Barbados," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    4. Bhupesh Verma & Ganeshprasad Pavaskar & Tobi Oluwatola & Aimee Curtright, 2017. "State-level Policy Analysis for PV Module Manufacturing in India," Working Papers id:12193, eSocialSciences.

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