OECD Green Growth and Sustainable Development Forum 2024

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Session 4 - How are industrial policies reshaping the climate-investment-trade nexus?

Oct 11, 2024 | 12:00 PM - 1:30 PM

Auditorium

Description

With a resurgence in the use of industrial policies driven by a range of concerns, there is growing interest in the role that well-designed industrial policies targeted at environmental outcomes could play in accelerating the net-zero transition. Industrial policies encompass a broad range of measures, including green public procurement, investing in skills for the green transition and government support for the development and deployment of low-carbon technologies. The use of government support, in particular, is the subject of debate. On the one hand, well-designed government support can help addressing market failures such as unpriced GHG emissions, underinvestment including from a lack of access to capital by smaller innovators, and R&D spillovers. Yet on the other hand, subsidies aimed at environmental outcomes could fail to deliver additionality, and undermine competitive markets, both domestically and if accompanied by protectionist policies (e.g., tariffs or local content requirements) internationally. This has impact on both the innovation required for the green transition and the use of scarce public resources. In addition, evidence suggests that such subsidies tend to go the largest and not necessarily the most productive or innovative firms and could exacerbate existing market-distorting government support. This session will explore the link between industrial policies aimed at the green transition, trade and investment.

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Session 4 - Key resources

Industrial policies

Green industrial policies for the net-zero transition

Countries are increasingly turning to industrial policy to address concerns over climate change, energy security and strategic autonomy. This paper explores the potential and risks of green industrial policies with a focus on green subsidies, and illustrates some key design considerations that governments should take into account when providing such support.
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