Governments are increasingly using industrial policy to develop low-carbon economic sectors and catalyse the energy transition. A recent study provides a framework to explain why governments adopt different types of green industrial policy, depending on industry position in the global supply chain and types of uncertainty.
Recently US President Biden announced a 100% tariff on Chinese electric vehicles, in a bid to boost demand for domestically manufactured electric vehicles. Given the small number of Chinese vehicles sold in the United States, this move is largely symbolic. Yet it shows how rapidly the global climate policy landscape is shifting from a focus on emissions to green industrial policy — the use of investments, incentives and regulations to promote decarbonization. Recent research, published in American Political Science Review by Bentley B. Allan and Jonas Nahm, helps to make sense of these policy shifts and their implications for geopolitics1. Green industrial policy is not simply about decarbonization; it is also about how countries are carving out their positions in the emerging global economy of the energy transition. The authors report that technological and socioeconomic uncertainty, along with an industry’s position in the global supply chain, determine what form of green industrial policy governments select.