An Industrial Policy Renaissance

The report examines the 'renaissance' of green industrial policy, defining it as government intervention to achieve environmental goals alongside economic growth. Through case studies of China, the US, the EU, Canada, Brazil, and South Korea, it highlights a shift toward interventionism driven by climate urgency and geopolitical rivalry. The authors argue that while these policies can accelerate decarbonization and lower technology costs globally, they risk increasing international inequality, creating market distortions, and triggering trade conflicts, particularly for developing nations with limited fiscal capacity.

• Green industrial policy is defined as government interventions that aim to maintain or increase national wealth while ensuring the global ecosystem's carrying capacity is not overstretched. It differs from traditional industrial policy by making normative distinctions between 'good' and 'bad' technologies and proactively phasing out unsustainable industries.
• China has achieved significant dominance in green technology value chains, accounting for over 80% of solar module production and over 70% of global production capacity for key wind turbine components. By 2024, clean energy sectors contributed approximately 10% (USD 1.9 trillion) to China's GDP.
• The United States experienced a dramatic shift in climate policy between the Inflation Reduction Act (IRA) of 2022, which allocated USD 369 billion for climate and energy, and the 'One Big Beautiful Bill' of July 2025, which sought to eliminate 'green' subsidies and repeal consumer credits for electric vehicles and buildings.
• The European Union's strategy focuses on carbon pricing and the Carbon Border Adjustment Mechanism (CBAM) to align import prices with domestic carbon costs. However, the EU faces internal political pressure to relax emissions targets and repeal the 2035 ban on combustion engine cars.
• Canada's green industrial efforts, including CAD 52.5 billion in EV supply chain investments between 2020 and 2024, have been hampered by market realities, such as Honda Canada postponing a CAD 15 billion project due to EV market slowdowns and U.S. tariffs.
• Brazil's Nova Indústria Brasil (NIB), launched in January 2024, aims to modernize industrial infrastructure by 2033, with a specific focus on bioeconomy and decarbonization. By early 2025, it attracted BRL 3.4 trillion in combined public and private investments.
• South Korea's 2020 Green New Deal utilized KRW 73.4 trillion to target job creation in renewable energy and hydrogen. The country also employs the Korea Emissions Trading Scheme, which covers 68% of national greenhouse gas output.
• Successful green industrial policies can create global environmental benefits by lowering the cost of clean technologies through economies of scale, as seen with China's impact on solar and EV battery costs. Conversely, unsuccessful policies can lead to a 'global welfare loss' if subsidies are used for 'smokestack chasing' rather than real innovation.
• The rise of green industrial policy may exacerbate international inequality, as only a small group of states with high fiscal capacity can afford the necessary subsidies, potentially crowding out developing and least developed countries.

APA

Altenburg, T., Behboodi, R., & Cosbey, A. (2025). An Industrial Policy Renaissance. International Institute for Sustainable Development. https://www.iisd.org/system/files/2025-10/industrial-policy-renaissance.pdf

Chicago

Altenburg, Tilman, Rambod Behboodi, and Aaron Cosbey. An Industrial Policy Renaissance. International Institute for Sustainable Development, 2025. https://www.iisd.org/system/files/2025-10/industrial-policy-renaissance.pdf.

Wikipedia

{{cite report |last1=Altenburg |first1=Tilman |last2=Behboodi |first2=Rambod |last3=Cosbey |first3=Aaron |title=An Industrial Policy Renaissance |publisher=International Institute for Sustainable Development |date=October 2025 |url=https://www.iisd.org/system/files/2025-10/industrial-policy-renaissance.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{altenburg2025industrial, author = {Altenburg, Tilman and Behboodi, Rambod and Cosbey, Aaron}, title = {{An Industrial Policy Renaissance}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = oct, url = {https://www.iisd.org/system/files/2025-10/industrial-policy-renaissance.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }