An Environmental Industrial Strategy for Sustainability

Abstract

The basic argument of this paper is that policies adopted to address the climate emergency and environmental degradation more generally should be embedded within an industrial strategy (labelled an environmental industrial strategy). An industrial strategy is viewed as government-led mapping out the developmental path for an economy, from which supporting industrial, labour and macroeconomic policies are derived. An environmental industrial strategy would identify sectors, processes and consumption patterns to be viewed as environmentally friendly (“green”). Industrial policies are then required to foster the development of “green” industrial processes, recognizing that the social benefits of such processes exceed the private benefits, Further, the pay-offs from investment in such processes are subject to fundamental uncertainty and long-term, and “lock-in” effects are significant. The green industrial strategy has to be supported by the funding of “green” investment, and policies such as a State Investment Bank. The transition to a sustainable economy requires the decline of carbon-intensive industries, and an industrial strategy must seek to address the employment consequences of such a decline. The paper considers the ways in which fiscal and monetary policies may support an environmental industrial strategy.