The Political Foundations of Green Industrial Policy
Why can some countries and not others generate the political will to support green industrial policy?
In the 1990s, countries around the world began adopting policies to protect the environment under the framework of "sustainable development." Introduced at the 1992 Earth Summit in Rio, the framework aimed to tackle climate change, environmental degradation, and other issues like water access and poverty. The idea quickly gained global support, driving a wave of new environmental policies in various countries. However, by the early 2000s, as key indicators of environmental health continued to decline, it became clear that these efforts were insufficient to halt environmental degradation, let alone climate change. As a result, the sustainable development framework began to lose momentum.
Responding to the failures of sustainable development, the "green growth" discourse emerged as a more pragmatic alternative that reframed environmental protection as not only compatible but even capable of enhancing economic growth. In this new framework, proponents emphasized not only that the costs of failing to reduce emissions far exceeded the costs of acting today but also that protecting the environment could generate industrial opportunities. Importantly, this made green growth palatable to mainstream economists and politicians where sustainable development wasn't. (I've written about the various policy approaches under the green growth discourse here.)
When it comes to green growth, we can learn from the failures of the sustainable development agenda. Part of the reason the latter failed to catalyze radical change was because mainstream policymakers didn’t take it seriously.1 Its focus on the environment at the cost of economic growth made it unappealing to politicians and mainstream economists, especially in developing countries focused on growth. And as a result, it couldn’t create the necessary political coalitions to back the project. In contrast, green growth, with its equal commitment to environmental protection and economic growth, can appeal to a broader set of economic interests. However, as we're already seeing by the adoption of green policies in some countries and not others, the appeal of green growth isn't universal. In some settings more than others, green growth threatens the interests of traditional energy sources and existing technologies and can invite political resistance. This raises the question: under what conditions can countries mobilize support for green growth policies and outmaneuver these powerful counter-interests?
Having surveyed recent research on the formation of green coalitions, I'll highlight three dimensions in which green growth policies—specifically green industrial policy—can attain political support:
Growth Models (export- vs consumption-led economies)
Development stage (early vs late developers)
Political system of interest representation (pluralism vs corporatism)
Growth Models
In comparative political economy, the growth models perspective has recently emerged as a new paradigm for understanding national variation in capitalist development.2 In this perspective, countries are categorized into one of two growth model types—consumption-led or export-led growth—around which firms, policymakers, and interest groups organize their activities. As Jonas Nahm shows, the growth models perspective can also explain political support for green industrial policies.3
In manufacturing-reliant, export-led economies like Germany and China, we might expect strong opposition to climate policies due to industries' reliance on energy. However, renewable energy firms in these economies can utilize legacy manufacturing infrastructure (e.g., tapping into existing production capabilities and export networks) and thus build a broad political coalition across producers and labor organizations to support green industrial policy. In other words, firms in export-led economies will readily join green coalitions and support policies that promote green manufacturing since it is likely to further existing interests in export-led manufacturing.
By contrast, consumption-led economies have weaker industrial sectors and would consequently lack broad support for green industrial policies. Because these economies are services-driven, environmental efforts tend to revolve around reducing energy consumption and accelerating deindustrialization rather than promoting green industrial capacity. For instance, they are more likely to implement policies to encourage consumers to purchase electric vehicles (EVs) rather than policies that help improve the competitiveness of domestic EV producers.
Development Stage
A country's stage of development can also influence the formation of green coalitions. Because early industrializers relied on traditional energy sources like coal and oil to fuel their growth, they tend to have a mature fossil fuel sector and entrenched fossil fuel incumbents with significant political influence. These incumbents can exercise their influence to resist or undermine green industrial policies and emergent green coalitions.
In contrast, late developers may be more inclined to embrace green industrial policy because of their broader goals to industrialize. As is well known from the development economics literature, industrial policies geared towards increasing a country's productive capacity (including green manufacturing) can create opportunities for backward and forward linkages, stimulate employment, boost productivity, and promote export-oriented growth.
Moreover, green technology supply chains are still emerging and may represent a new manufacturing frontier. In established sectors like semiconductors, early developers have exploited first-mover advantages and dominate the supply chain, making it challenging for developing countries to break into them. However, if developing countries were to act fast on green manufacturing, they could secure better positions in still-emerging value chains.4 In this way, the primary challenge of green manufacturing in developing countries is less a matter of political will and more about the state’s capacity and ability to mobilize investment to support it.
Political system of interest representation
Finally, a country’s system of interest representation can also effect green coalition formation. In a corporatist state, constituent units are non-competitive, compulsory, hierarchically ordered, and state-recognized. In this setup, selected interest groups are granted sole representation over their respective category. This structure grants incumbent firms a monopoly representation over the broader category they are part of. This means that challengers to the status quo, such as electric vehicle makers or renewable energy firms, will have their policy preferences sidelined. This is what happened in Germany, where incumbent automakers coordinated horizontally within the industry and vertically within the centralized policy forum to prevent pro-EV policies from passing.5
By contrast, a pluralist state is defined as a system of interest groups where members are organized into a number of voluntary, competitive, non-hierarchically ordered, and self-determined groups. Because the state doesn’t formally recognize these groups, they do not have sole representation of their category. This means that incumbents must constantly engage in political competition to get their policy preferences through. Meanwhile, challengers can outmaneuver incumbent interests since policy forums are decentralized. In this way, the pluralist structure of interest representation may be more fertile for passing green industrial policy that inherently favors challengers over incumbents. This was why pro-EV policymakers succeeded in the U.S., a pluralist system, and not Germany, a corporatist one.
In sum, a country's growth model (consumption- vs export-led), its stage of development (early vs late developer), and its political system of interest representation (corporatism vs pluralism) are important factors when it comes to the formation of green coalitions (see table below for summary).
Engineering green coalitions
Where does this leave us? Having highlighted these variables, it may seem like some countries are endowed with certain characteristics that are more conducive to the formation of green coalitions—as if the political will underpinning green industrial policy is out of the hands of policymakers. However, we should remember that green industrial policy is not necessarily beholden to the existing landscape of coalitions. Policymakers can also engineer green coalitions with the right policy design.
If policymakers strategically sequence their policy initiatives, beginning with small policies that can seed political and economic support, they can gradually increase the ambition of their policies without political backlash. And if done correctly, these policies can break carbon lock-in and create the conditions for strong green coalitions. What exactly would such a process look like?
According to Meckling et al. (2015)6, one approach is to start with policies that generate support across broad-based coalitions rather than policies that punish energy incumbents because they can provoke opposition and backlash. The idea is that small, initial policy actions can create positive feedback loops that reshape political and economic interests, generating a "Green Spiral," whereby early policy interventions force traditional industries to adapt to the new regulatory environment, which then diminishes traditional industries' resistance to more ambitious green policies.7
This is just one example of how green coalitions can be engineered. More research about engineering green support in different country contexts is needed. Without thinking carefully about how to craft green coalitions, green industrial policy risks falling into the same traps as its "sustainable development" predecessor.
Jacobs, Michael. 2013. “Green Growth.” In The Handbook of Global Climate and Environment Policy, John Wiley & Sons, Ltd, 197–214.
Baccaro, Lucio, and Jonas Pontusson. 2016. “Rethinking Comparative Political Economy: The Growth Model Perspective.” Politics & Society 44(2): 175–207.
Nahm, Jonas. 2022. “Green Growth Models.” In Diminishing Returns, eds. Lucio Baccaro, Mark Blyth, and Jonas Pontusson. Oxford University Press. New York, 443–64.
Allan, Bentley, Joanna I. Lewis, and Thomas Oatley. 2021. “Green Industrial Policy and the Global Transformation of Climate Politics.” Global Environmental Politics 21(4): 1–19.
Meckling, Jonas, and Jonas Nahm. 2018. “When Do States Disrupt Industries? Electric Cars and the Politics of Innovation.” Review of International Political Economy 25(4): 505–29.
Meckling, Jonas, Nina Kelsey, Eric Biber, and John Zysman. 2015. “Winning Coalitions for Climate Policy.” Science 349(6253): 1170–71.
See Breetz et al. (2018) for an account of how policy design can help foster the adoption of green technologies while avoiding political backlash from incumbent players. (Breetz, Hanna, Matto Mildenberger, and Leah Stokes. 2018. “The Political Logics of Clean Energy Transitions.” Business and Politics 20(4): 492–522.)