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iiCOPYRIGHT UN ENVIRONMENT, 2017The report is published as part of the Partnership for Action on Green Economy (PAGE)—aninitiative by the United Nations EnvironmentProgramme (UN Environment), the International Labour Organization (ILO), the UnitedNations Development Programme (UNDP), theUnited Nations Industrial Development Organization (UNIDO) and the United Nations Institutefor Training and Research (UNITAR) in partnership with the German Development Institute /Deutsches Institut für Entwicklungspolitik (DIE).This publication may be reproduced in whole or inpart and in any form for educational or non-profitpurposes without special permission from thecopyright holder, provided acknowledgement ofthe source is made. PAGE would appreciate receiving a copy of any publication that uses this publication as a source.No use of this publication may be made for resaleor for any other commercial purpose whatsoeverwithout prior permission in writing from PAGE.CITATIONAltenburg, T., & Assmann, C. (Eds.). (2017). GreenIndustrial Policy. Concept, Policies, Country Experiences. Geneva, Bonn: UN Environment; GermanDevelopment Institute / Deutsches Institut fürEntwicklungspolitk (DIE).UN Environment gratefully acknowledges thefinancial support of Deutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ) GmbH forthe layout and printing of this book. The publication was supported by the project “Enhancinglow-carbon development by greening the economy in co-operation with the Partnership forAction on Green Economy (PAGE)” funded by theInternational Climate Initiative (IKI) of the FederalMinistry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB).Cover photo: Colourbox.comPAGE also gratefully acknowledges the support ofall its funding partners: European Union Federal Ministry for the Environment, NatureConservation, Building and Nuclear Safety,Germany Ministry for Foreign Affairs of Finland Norwegian Ministry of Climate andEnvironment Ministry of Environment, Republic of Korea Government Offices of Sweden Swiss Confederation, State Secretariat forEconomic Affairs (SECO)DISCLAIMERThis publication has been produced with thesupport of PAGE funding partners. The contents ofthis publication are the sole responsibility of PAGEand can in no way be taken to reflect the views ofany government. The designations employed andthe presentation of the material in this publication do not imply the expression of any opinionwhatsoever on the part of PAGE concerning thelegal status of any country, territory, city or areaor of its authorities, or concerning delimitation ofits frontiers or boundaries. Moreover, the viewsexpressed do not necessarily represent the decision or the stated policy of PAGE, nor does citingof trade names or commercial processes constitute endorsement.UN Environmentpromotes environmentallysound practices globally and inits own activities. This publicationis printed on 100% recycled paper,using vegetable-based inks and othereco-friendly practices. Our distributionpolicy aims to reduce UN Environment’scarbon footprint.


Green Industrial Policy - Concept, Policies, Country ExperiencesivACKNOWLEDGEMENTSThis publication was produced by the UnitedNations Environment Programme (UN Environment) in partnership with the German Development Institute (DIE) within the framework of thePartnership for Action on Green Economy (PAGE).The book was conceptualized and implementedby the editors, Tilman Altenburg (DIE) and ClaudiaAssmann (UN Environment), under the strategicguidance and advice of Sheng Fulai and StevenStone from the Resources and Markets Branch atUN Environment.Contributing authors for this publication wereTilman Altenburg (DIE), Stefan Ambec (University of Toulouse), Sandra Averous Monnery (UNEnvironment), Verena Balke (UN Environment),Richard Bridle (IISD), Liesbeth Casier (IISD), AaronCosbey (IISD), Pedro da Motta Veiga (CINDES),Hans Eichel (Friedrich Ebert Foundation),Michela Esposito (ILO), Steve Evans (Universityof Cambridge), Kaidong Feng (Peking University),Alexander Haider (New School of Social Research),René Kemp (United Nations University), BabetteNever (DIE), Emilio Padilla (Universitat Autónomade Barcelona), Anna Pegels (DIE), Sandra PolóniaRios (CINDES), Liazzat Rabbiosi (UN Environment),Dani Rodrik (Harvard University), Daniel Samaan(ILO), Kai Schlegelmilch (Green Budget Germany),Willi Semmler (New School of Social Research),Qunhong Shen (Tsinghua University), GeorgetaVidican Auktor (DIE) and Peter Wooders (IISD).We would like to thank Catherine P. McMullen forher excellent and diligent language editing, whichhelped streamline the publication and create anarrative throughout it. Invaluable support wasprovided to the editorial team by Gisele Müller,Elena Antoni, and Verena Balke who commentedon drafts, reviewed chapters and helped pull thepublication together with persistence and relentless efforts.We are very grateful for comments and suggestions from a number of capable reviewers,including Antoine Dechezleprêtre (LSE); MathieuGlachant (MINES ParisTech); Paul Lanoie (HECMontreal); Pepita Miquel-Florensa and NicolasTreich (Toulouse School of Economics); JérémyLucchetti (University of Geneva); Tareq Emtairah(Lund University); Wilfried Lütkenhorst (DIE);Wang Tong (China Automotive Technology andResearch Center); Karsten Neuhoff (GermanInstitute for Economic Research, DIW); SmeetaFokeer and Michele Clara (UNIDO); Ying Zhang,Sirini Withana and Bert Fabian (UN Environment); Hubert Schmitz (Institute of DevelopmentStudies, Brighton); Mariano Laplane (Centro deGestão e Estudos Estratégicos, CGEE) and RainerQuitzow (Institute of Advanced SustainabilityStudies, IASS).We would like to thank Robert Wilson for thedesign and layout of this publication and JunkoTaira (UNITAR) and Beibei Gu (UN Environment)for additional assistance during the publicationprocess. Sincere thanks also go to Fatma Pandey,Rahila Somra and Desiree Leon for the administrative assistance with this publication.We are also grateful to the German AcademicExchange Service, the German NationalAcademic Foundation and the Mercator Foundation for their support through the theCarlo-Schmid-Programme.This publication was made possible with thesupport from the Partnership for Action onGreen Economy (PAGE) and its funding partners,as well as the Swedish Government. The layoutand printing of this publication was supportedby the Deutsche Gesellschaft für InternationaleZusammenarbeit (GIZ) GmbH, with funding fromthe German Federal Ministry for the Environment, Nature Conservation, Building and NuclearSafety (BMUB).

ForewordFOREWORDvA green economy is increasingly accepted as akey driver in tackling climate change, poverty,pollution, health and any number of critical goalsto improve life for this planet and its people. Boldwords, but this report shows that it is within ourgrasp to turn them into action.Restructuring industrial systems needs a diverse,cross-sector approach. By moving beyond traditional industrial policies to a framework thatencompasses environmental and energy policies,the authors explore how this could acceleratestructural transformation and enhance productivity. In fact, through research and case studies,it shows how green industrial policy frameworkscan be a valuable tool for all economies.For example, Morocco used to import 95 per centof its energy via coal, gas and electricity in 2011.Now, around a third is from domestic renewablesources and the country is building Africa’s largestsolar power plant, the Ouarzazate Solar Complex.The country plans to produce 15 per cent of electric capacity from solar power by 2020. As well asboosting Morocco’s renewable energy, the solarplant is also strengthening the local economy.People like the 35-year-old Azzedine, who worksas a driver, found jobs there. For the first time, henow earns a fixed salary every month and feelslucky to be among the young people with a stablejob at the plant. However, it is not only big projectsthat will bring about economic and environmentalbenefits. The demand for small independent electricity producers may also promote long-term jobsand private sector development.Likewise, in China, unbearable urban air pollutionhas led to health problems, which are in turn driving an increase in demand for electric mobility.It’s a demand being carefully nurtured through abasket of measures including research and development, technology sharing agreements withglobal investors, strategic public procurement,purchase subsidies and city trials. Not only doemissions go down, but in 2014, China was alreadyproducing 85 per cent of the world’s electricERIK SOLHEIMHead of UN Environmenttwo-wheelers and exporting some 5 million a year,mainly to other Asian markets.Many of the findings of this report are alreadybeing put into practice around the world. Throughthe United Nations Industrial Development Organization, the Partnership for Action on Green Economy is helping governments to develop actionplans that include green industrial policy recommendations. For example, in Burkina Faso, Ghana,Peru, Senegal and China green industry assessments have been conducted or are under way.Green industrial policies offer a practical way toshape inclusive, sustainable economies rightaround the world. I sincerely hope that this reportwill raise awareness of the tools available topublic and private decision-makers determined tobuild a better future for this planet and its people.

Green Industrial Policy - Concept, Policies, Country ExperiencesviTABLE OF CONTENTSivACKNOWLEDGEMENTSvFOREWORDErik SolheimviiLIST OF BOXESLIST OF TABLESviii LIST OF FIGURESixABBREVIATIONSxiEXECUTIVE SUMMARYTilman Altenburg, Claudia AssmannPART 1: CONCEPTUAL FOUNDATIONS1Chapter 1Green industrial policy: Accelerating structural change towards wealthy greeneconomiesTilman Altenburg, Dani RodrikPART 2: THE ECONOMIC AND SOCIAL CO-BENEFITS OF GREEN TRANSFORMATION22Chapter 2What can developing countries gain from a green transformation?Emilio Padilla38Chapter 3Gaining competitive advantage with green policyStefan Ambec50Chapter 4Enhancing job creation through the green transformationMichela Esposito, Alexander Haider, Willi Semmler, Daniel SamaanPART 3: ACCELERATING CHANGE69Chapter 5In with the good, out with the bad: Phasing out polluting sectors as greenindustrial policyAaron Cosbey, Peter Wooders, Richard Bridle, Liesbeth Casier87Chapter 6Developing green technologies and phasing them inBabette Never, René Kemp102 Chapter 7Pricing environmental resources and pollutants and the competitiveness ofnational industriesKai Schlegelmilch, Hans Eichel, Anna Pegels120 Chapter 8Promoting circular economiesVerena Balke, Steve Evans, Liazzat Rabbiosi, Sandra Averous Monnery134 Chapter 9Trade and investment law and green industrial policyAaron CosbeyPART 4: COUNTRY EXPERIENCES153 Chapter 10Renewable energy as a trigger for industrial development in MoroccoGeorgeta Vidican Auktor166 Chapter 11Germany: The energy transition as a green industrial development agendaAnna Pegels185 Chapter 12Electric mobility and the quest for automobile industry upgrading in ChinaTilman Altenburg, Kaidong Feng, Qunhong Shen199 Chapter 13Ethanol policy in Brazil: A ‘green’ policy by accident?Pedro da Motta Veiga, Sandra Polónia Rios

List Of Boxes / List of TablesLIST OF BOXES73Box 5.1Jordan’s fossil fuel subsidy reform74Box 5.2Fossil fuel subsidy reform in Morocco76Box 5.3China’s drive for a greener economy77Box 5.4Ontario’s coal phase out and renewables support107Box 7.1Factors influencing foreign direct investment in Vietnam108Box 7.2Germany’s tax exemptions for industry: Leaving efficiency potentials untapped111Box 7.3Earmarking in Chile114Box 7.4Raising acceptance for environmental fiscal reform through cash transferprogrammes: The Indonesian Bantuan Langsung Tunai201Box 13.1Proálcool era: mid 1970s to mid 1980s203Box 13.2Deregulation and liberalization in the 1990s206Box 13.3The energy and environmental balance of sugarcane ethanol207Box 13.4Flex-fuel automobiles and international commodity prices from 2003 to 2008209Box 13.5Back to the crisis: since 2008LIST OF TABLES8Table 1.1New green product and service opportunities for countries at differentincome levels54Table 4.1Employment estimates of green jobs in the European Union67Table 4.2Top ten HCS and LCS in the last available year78Table 5.1Ontario’s electrical generating capacity (comparison 2010–2016)98Table 6.1Overview of functions of front-runner desk for innovators and policy147Table 9.1Summary: Legality of trade and investment measures168Table 11.1Quantitative targets and status quo 2014 of the Energiewende178Table 11.2German gross employment in renewable energies, overview of study results190Table 12.1Main polices for the promotion of electric vehicles in Chinavii

Green Industrial Policy - Concept, Policies, Country ExperiencesviiiLIST OF FIGURES28Figure 2.1Key areas of regulation55Figure 4.1Employment in the environmental sector, 2005–201356Figure 4.2Employment shares in EGSS in EU countries, 201459Figure 4.3Share of CO2 emissions by industry and ILO region60Figure 4.4Employment shares in GHG emitting industrial sectors by region72Figure 5.1Spectrum of types of disruptive green industrial policy92Figure 6.1Long-term phase-in of building standards113Figure 7.1Financing income tax cuts through environmental fiscal reform in SouthAfrica: The revenue effects of various reform elements122Figure 8.1Conceptual diagram of a circular economy169Figure 11.1German greenhouse gas emissions 1990–2015, target 2020170Figure 11.2European Energy Exchange electricity spot-market prices in Germanyagainst renewable electricity generation172Figure 11.3Research, development and deployment budget energy technologies,Germany172Figure 11.4Relative patent shares in relevant energy technologies, Germany173Figure 11.5World market shares wind energy converters174Figure 11.6World market shares solar photovoltaic cells176Figure 11.7Perception of Energiewende impacts on competitiveness178Figure 11.8German gross employment in renewable energies, 2004–2013179Figure 11.9Employment in renewable energy and coal industries, Germany, 2002–2015180Figure 11.10Feed-in tariff components205Figure 13.1Number of licensed vehicles per type of fuel, 1979–2015210Figure 13.2Ethanol production in Brazil, 1980–2015

AbbreviationsABBREVIATIONSACEAEuropean AutomobileManufacturers' AssociationADBAsian Development BankADEREENational Agency for theDevelopment of RenewableEnergy Sources and EnergyEfficiency MoroccoANPBrazilian National Agency ofPetroleum, Natural Gas, andBiofuelsANPMEMoroccan National Agency for thePromotion of Small and Mediumsized EnterprisesBAFUSwiss Federal Office for theEnvironmentBEEIndian Bureau of Energy EfficiencyBLSU.S. Bureau of Labor StatisticsBMFAustrian Federal Ministry ofFinanceBMU/BMUBGerman Federal Ministryfor the Environment, NatureConservation, Building andNuclear SafetyFAOFood and Agriculture Organizationof the United NationsFINEPBrazilian Studies and ProjectsFinancing AgencyGATSGeneral Agreement on Trade inServicesGATTGeneral Agreement on Tariffs andTradeGCFGreen Climate FundGDPGross Domestic ProductGEFGlobal Environment FacilityGGGIGlobal Green Growth InstituteGHGGreenhouse gasGPAAgreement on GovernmentProcurementGWGigawattHCSHigh-carbon sectorIAABrazilian Institute of Sugar andAlcoholICMSBrazilian value added tax on salesand servicesICSIDInternational Centre for theSettlement of Investment DisputesBNDESBrazilian Development BankBNEFBloomberg New Energy FinanceICTSDBNSTPBourse Nationale de Soustraitance et de PartenariatInternational Centre for Trade andSustainable DevelopmentIDRIndonesian RupiahCDMClean Development MechanismIEAInternational Energy AgencyCEEWCouncil on Energy, Environmentand WaterIESOOntario Independent ElectricitySystems OperatorCGEEBrazilian Centre of StrategicManagement and StudiesIFCInternational Finance CorporationIISDCIDEBrazilian fuel taxInternational Institute forSustainable DevelopmentCOFINSBrazilian Social SecurityFinancing ContributionILOInternational Labour OrganizationIMFInternational Monetary FundCOMETRCompetitiveness Effects ofEnvironmental Tax ReformsINSGInternational Nickel Study GroupCO2eCarbon dioxide equivalentsIPCCIntergovernmental Panel onClimate ChangeDENAGerman Energy AgencyIRENADIEGerman Development InstituteInternational Renewable EnergyAgencyDIHKGerman Chamber of Industry andCommerceIRESENInstitut de Recherche en EnergieSolaire et en Energies NouvellesEGSSEnvironmental Goods andServices SectorISLInternational Synergies, Ltd.ISOEUEuropean UnionInternational Organization forStandardizationEZDutch Ministry of EconomicAffairsLCSLow-carbon sectorLDCLeast developed countriesix

Green Industrial Policy - Concept, Policies, Country ExperiencesxLCRLocal content requirermentLNPLiquefied natural gasLPGRCREEERegional Center for RenewableEnergy and Energy EfficiencyLiquid petroleum gasRREUSELULUCFLand use, land-use changeand forestry (greenhouse gasinventory sector)Reuse and Recycling EU SocialEnterprisesSCMSubsidies and CountervailingMeasuresMADMoroccan DirhamSEEAMAPGerman Market IncentiveProgramme for RenewableEnergiesSystem of EnvironmentalEconomic AccountingTEDATianjin Economic-TechnologicalDevelopment AreaMASENMoroccan Agency for SustainableEnergyTISATrade in Services AgreementTRIMSMCINETMoroccan Ministry of Industry,Trade and New TechnologyAgreement on Trade-RelatedInvestment MeasuresTRUMEMEEMoroccan Ministry of Energy,Mining, Water and theEnvironmentBrazilian highways maintenancetaxUKUnited KingdomMENAMiddle East and North AfricaUNUnited NationsMMEBrazilian Ministry of Mines andEnergyUNCTADUnited Nations Conference onTrade and DevelopmentMWMegawattUNDPUnited Nations DevelopmentProgrammeNAFTANorth American Free TradeAgreementUNEPUN Environment / United NationsEnvironment ProgrammeNAPEGerman National Action Plan onEnergy EfficiencyUNFCCCUnited Nations FrameworkConvention on Climate ChangeNRDCNatural Resources DefenseCouncilUNICABrazilian Sugarcane IndustryAssociationOECDOrganisation for EconomicCooperation and DevelopmentUNIDOUnited Nations IndustrialDevelopment OrganizationOICAInternational Organization ofMotor Vehicle ManufacturersVATValue added taxOPAOntario Power AuthorityVROMDutch Ministry of Housing, SpatialPlanning and the EnvironmentPAGEPartnership for Action on GreenEconomyWBCSDWorld Business Council forSustainable DevelopmentPAISSBrazilian Support Plan forIndustrial and TechnologicalInnovation for the Sugar-Energeticand Sugar-Chemical SectorsWEFWorld Economic ForumWIEGOWomen in Informal Employment:Globalizing and OrganizingWIODWorld Input-Output DatabaseWITSWorld Integrated Trade SolutionPERGMoroccan Renewable Energy andGlobal Rural Electrification ProjectPISBrazilian Profit ParticipationProgrammeWHOWorld Health OrganizationWTOWorld Trade OrganizationDevelopment Programme of theMoroccan market for solar waterheatersWWIISecond World WarZARSouth African RandPROMASOLPROPERIndonesia’s Programme forPollution Control, Evaluation, andRating

Executive SummaryEXECUTIVE SUMMARYTILMAN ALTENBURG AND CLAUDIA ASSMANNHumanity is confronted with profound andmounting man-made environmental crises. TheUnited Nation’s Millennium Ecosystem Assessment provided an alarming inventory of thedegree of deterioration in many of the world’secosystems (MEA 2005). Global warming is nowwidely recognised as an immediate threat tohumanity. As the Intergovernmental Panel onClimate Change shows, only a few years are left toradically decarbonise the world economy if disastrous global warming is to be avoided (IPCC 2014).Other environmental crises have so far receivedless public attention, but are also serious andpotentially threatening the continuity of humanlife on Earth. These include the loss of biodiversity, depletion of

ization, the Partnership for Action on Green Econ-omy is helping governments to develop action plans that include green industrial policy recom-mendations. For example, in Burkina Faso, Ghana, Peru, Senegal and China green industry assess-ments have been conducted or are under way. Green industrial policies offer a practical way to