Green Industrial Policy: Accelerating Structural Change towards Wealthy Green Economies

There are two major reasons for governments and societies to accelerate structural change in their economies and proactively shape the direction of the change. First, there is the challenge of creating wealth. Structural change, that is, the reallocation of capital and labour from low- to high-productivity activities, is a key driver of productivity growth and higher incomes. This is particularly important for developing countries where incomes are low and poverty is pervasive. According to the latest available estimates, 767 million people lived on less than US$ 1.90 a day, and 1.9 billion people in the developing world still had less than US$ 3.10 a day in 2013–a clear indication that the current structural composition of national economies does not provide a sufficient number of productive jobs (World Bank 2016). Second, economic development has so far been achieved at the cost of severe overexploitation of natural resources. Humanity is approaching various ecological tipping points beyond which abrupt and irreversible environmental change at large geographical scales is likely to happen (Rockström et al. 2009). Radically new techno-institutional systems are needed to decouple economic development and human well-being from resource depletion and waste production. While many of the required technologies are already available, the incentives guiding resource allocation need to change profoundly to disrupt current unsustainable technological pathways and change some economic subsystems entirely, such as those for energy provision and transport (IPCC 2014).