Green Industrial Policy
05 June 2024 – DCED Annual Meeting
Dr. Karin Wedig (giz), Lead Sector Project Sustainable Economic Development
on behalf of BMZ Division 411 Sustainable Economic and Financial Systems

Why Green Industrial Policy ?

Most partner countries are least responsible for climate &biodiversity crises, but are most affected.
All countries must reduce GHG and increase resource
effiency: common but differentiated responsibilities
Partner countries need to „grow green“ to participate in futuremarkets.

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Green Industrial Policy

Defining green industrial policy•Use of traditional IP instruments (e.g., subsidies, tax incentives, purchasecommitments, state-owned enterprises, R&D support, protective regulations) on
green sectors and/or sectors that can be transformed green.

•Green IP goes beyond traditional instruments: market failures are more serious +high degree of technological uncertainty + climate crisis puts time pressure.

•Government creates profit opportunities in clean technologies whilst withdrawing
profit opportunities in polluting technologies. See report led by IDOS, 2017, “GreenIndustrial Policy - Concept, Policies, Country Experiences”.

•

Political economy: Green IP provides alternative and complement for difficult toenforce carbon pricing schemes.

What is Green
Industrial Policy?

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Green Industrial PolicyBenefits of green industrial policy for partner countries
1. Contribution to decarbonisation agenda (Paris Agreement)
2. Pro-poor growth•

Domestic value and jobs through RE / green mineral production•

Circular economy: More labour, less capital- and resource intensive

3. Anticipate market trends + potential for leapfrogging
4. New markets and structures

Seite 4•

New energy-intensive industry clusters in countries with good RE
endowments•

Counteract anti-poor distributional effects•

Inclusion of disadvantaged groups → holistic approach needed (e.g. TVETsystems)

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Green Industrial Policy

Typical arguments against (green) industrial policy

Bureaucrats are bad at „pickingwinners“→ misleading: green IP about coordinating market
actors to solve sector-specific market failures.
Smart polices use market mechanisms to ensure
efficiency (e.g. tendering of subsidies for RE).

Even when markets fail, government
interventions may make things worse(“government failure”)→ Relevant: applies to any policy. Policy design can
prevent political distortions and capture: level ofembedded autonomy of government vis-à-vis
economic actors, checks and balances, use ofcompetition and market mechanisms to determine
subsidy levels, etc.

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Green Industrial Policy

Green industrial policy trends in partner countries➢ Implementation of sustainable business practices depends on forwardlooking economic benefits → focus on job-creation➢ Focus on RE production where endowments are good−

Increase access to electricity, for households and (S)MEs−

Build-up of industrial clusters using green hydrogen➢ Focus on resource efficiency (high import prices, water scarcity…)➢ Agri-processing for export and domestic food production➢ Critical minerals to power domestic and world's clean energy agenda

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Green Industrial Policy

Social dimension of green industrial policy➢ German cooperation promotes holistictransformation of economic systems.

focusonsocial-ecological➢ IP for social-ecological transformation: contribute to job creation andsocial inclusion → economic growth that protects environment and people.
−

Ecological goals effectively captured by green industrial policy.

−

Social goals not yet well addressed: IP needs to actively counteract
negative distributional effects caused by structural changes in theeconomy.

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Green Industrial Policy

Social dimension of green industrial policy –example of women‘s economic empowerment➢ Gender equality and WEE can support green IP➢ Green IP can contribute to gender equality and WEE.
However, targeted policy action needed:−changes in industrial structure create new risks for different groups of people, including by gender.

−

emerging research on how green IP impacts disadvantaged groups (esp. women, but also
LGBTQIA+, ethnic minorities, people with disabilities, etc.)−

discrimination against women embedded in society → IP may replicate existing discrimination, if
not specifically adressed.

→ Green IP needs to address social-ecological transformation of economies

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Green Industrial Policy

Gender approaches in industrial policy measures
DC measures can contribute to social dimensions of green IP, deliver on Germany’s Feminist
Development Policy and contribute to gender-related outcomes of “3R” framework:Rights

DC can contribute to removing legal barriers to women’s participation in green industrial
sectors and strengthen decent work

Resources… enhancing intangible resources or skill endowments, particular in STEM, that allow
women to compete for green jobs.

… to increasing women’s awareness of and participation in industrial policy making
Representation

Seite 903/06/2024… to increasing women´s labour force participation and reducing economic andhierarchical segregation of women in the industrial sector → change social norms

Green Industrial Policy

The Investment Climate Reform (ICR) Facility•••••The ICR Facility is demand based and offers targeted, short-term TA for businessenvironment improvements.
Funding: €22.75m of which €20m from EU, €2.5m BMZ, €0.25m British Council
Target groups are e.g. ministries, business associations, development finance institutions
in most countries in Africa, the Caribbean and the Pacific.
Focus on promoting Business Environment Reforms that enhance WEE.
ICR Facility−offers expertise for business environment and investment climate improvement initiatives−

provides expertise to national and subregional development finance institutions−

supports knowledge exchange, e.g. via ICR4WEE Conference with session on gender-sensitive
industrial policies

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Green Industrial Policy

ICR-Facility intervention: updating the industrial policy
for Eswatini•2015: Ministry of Commerce, Industry and Trade of Eswatini formulated first Industrial
Development Policy.

•2022: request to assist in formulating a revised evidence-based Industrial Policy toimprove the local investment climate and to attract more FDI.

•Objectives: a more inclusive policy, enabling the business environment to create
better quality jobs and ensuring significantly improved livelihoods of women and youth•

Approach:−

Various national stakeholder consultation workshops with government and private sector
representatives−

concerted effort was made to ensure that consultation workshops were gender-balanced and thatorganizations representing women businesses were present to ensure that their needs andinterests were well captured

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Green Industrial PolicySupporting Green Industrial Policymakingin Jordan

Innovating

RecognisingSharing AwarenessSeite 1203/06/2024– National Circularity Roadmap for Jordan– Textile Waste Sorting and Transfer Guidelines– Water Footprint as Part of the Environment ImpactAssessment– Circularity Hub for Spent EV Batteries– National Ecolabel Scheme– RECP Auditor Scheme– Green and Sustainable Finance, ESG– Carbon Emission Market and Trading– Circularity in Industry

Green Industrial Policy

Thank you very much for your attention!

SV Nachhaltige Wirtschaftspolitik (NaWiPol)

Dr. Karin Wedig
Head of ProjectBerlin, Germany
Tel.: +49 30 338424-498
karin.wedig@giz.deSeite 1306/2024

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