Industrial Policy in Developing Countries

Industrial Policy in Developing Countries

Failing Markets, Weak States

Tilman Altenburg and Wilfried Lütkenhorst

Against the backdrop of persistently high levels of poverty and inequality, critical environmental boundaries and increasing global economic interdependence, this book addresses the role and impact of industrial policies in developing countries. Accepting the reality of both market failure and policy failure, it identifies the conditions under which industrial policy can deliver socially desirable results. General conclusions on the political economy of development are complemented by country case studies covering Ethiopia, Mozambique, Namibia, Tunisia and Vietnam.

Chapter 4: Industrial policy for a green transformation

Tilman Altenburg and Wilfried Lütkenhorst

Subjects: development studies, development economics, economics and finance, development economics, industrial economics


While equitable, inclusive and regionally balanced economic development has long been a concern for industrial policy (despite its having been overshadowed by an often narrowly defined economic growth agenda), attempts to conceptualise green industrial policies are of more recent origin. We will thus elaborate on this approach and its implications in greater detail below. Given the expected drastic consequences of climate change and the increasingly rapid deterioration of other environmental resources, the development of resource-efficient, low-emission technologies is arguably the most important challenge for future industrial policy. While the current debate is focused on low-carbon technologies, scarcity of other finite resources – in particular water and fertile soils – will also soon become acute at the global level. Today, climate change is the most burning issue. The looming danger of catastrophic climate change has given rise to concerns about economic development exceeding the earth’s carrying capacity, that is, running against planetary boundaries and exiting our ‘safe operating space’ (Rockström et al. 2009). While the international community has acknowledged a 2°C global warming as a redline not to be crossed, according to the central scenario of the International Energy Agency’s global forecast (IEA 2013), the world is currently moving along a path of a long-term average temperature increase of 3.6°C. Importantly, this scenario already accounts for all measures announced to date by national governments in the fields of promoting the use of renewables, pricing carbon, adjusting the energy subsidy systems and increasing energy efficiency.

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