Green industrial policy: challenges and opportunities for a globally inclusive and fair energy transition

The report analyzes the global trend toward 'green industrial policies'—characterized by state intervention through subsidies, procurement, and local content requirements—and warns that these measures often prioritize domestic benefits over global equity. While EMDEs can benefit from lower technology costs and new trade opportunities in critical minerals, they face risks of 'extractive lock-in' and market distortions. The authors propose pathways for a more inclusive transition, including preferential technology licensing, scaled-up climate finance, and the recycling of carbon border adjustment revenues to support industrial upgrading in developing nations.

• There is a global shift toward 'green industrial policies' where states use interventionist tools like subsidies, procurement policies, and clean technology incentives to drive economic transformation, often alongside market mechanisms like carbon taxes.
• Current green industrial policies in major economies risk creating a "two-speed" transition, where advanced economies advance rapidly while EMDEs face barriers to technology adoption and inclusion in green value chains, potentially undermining global climate goals.
• Data from 2023 shows that domestic subsidies are the most frequently used industrial policy instrument across both advanced economies and EMDEs, though advanced economies more frequently use export subsidies and localization controls, while EMDEs more frequently use import barriers.
• EMDEs face a strategic risk of 'extractive lock-in,' where they remain limited to exporting raw materials or energy carriers without capturing higher-value stages of production, such as processing and manufacturing.
• The EU's Carbon Border Adjustment Mechanism (CBAM) is identified as a significant challenge for EMDEs, with estimates suggesting it could curtail targeted exports from developing countries to the EU by between 1.4% and 2.4%.
• To ensure inclusivity, the report suggests linking green subsidies in high-income countries to preferential licensing and technology sharing with EMDEs, and recycling revenues from carbon-related trade measures into industrial upgrading in affected partner countries.
• International climate finance for industrial development can be scaled through instruments like the Climate Investment Funds' USD 1 billion Industry Decarbonization Program and the use of debt-for-climate swaps, such as Germany's program redirecting up to EUR 150 million annually.

APA

Maltais, A., & Suljada, T. (2025). Green industrial policy: challenges and opportunities for a globally inclusive and fair energy transition. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2025/10/green-industrial-policy-sei2025-047.pdf

Chicago

Maltais, Aaron, and Timothy Suljada. Green industrial policy: challenges and opportunities for a globally inclusive and fair energy transition. Stockholm Environment Institute, 2025. https://www.sei.org/wp-content/uploads/2025/10/green-industrial-policy-sei2025-047.pdf.

Wikipedia

{{cite report |last1=Maltais |first1=Aaron |last2=Suljada |first2=Timothy |title=Green industrial policy: challenges and opportunities for a globally inclusive and fair energy transition |publisher=Stockholm Environment Institute |date=October 2025 |url=https://www.sei.org/wp-content/uploads/2025/10/green-industrial-policy-sei2025-047.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{maltais2025green, author = {Maltais, Aaron and Suljada, Timothy}, title = {{Green industrial policy: challenges and opportunities for a globally inclusive and fair energy transition}}, institution = {Stockholm Environment Institute}, year = {2025}, month = oct, url = {https://www.sei.org/wp-content/uploads/2025/10/green-industrial-policy-sei2025-047.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }