Green Industrial Transitions in the EU and the US

On 22 June 2023 the OECD, together with the Hertie School Berlin and d\carb future economy forum from the Berlin School of Economics, hosted a conference on the challenges and opportunities of Green Industrial Policies. Once out of fashion, industrial policy has made a strong comeback, partly driven by the enormous economic restructuring required to reduce greenhouse gas emissions to net-zero by mid-century. The US, the EU, but also Japan, China and many other countries are all taking a much more active approach, using tax breaks and direct subsidies to develop green technologies and markets. Policymakers and researchers from the US, the EU and Germany discussed various facets of the green industrial transition, with two underlying challenges emerging: How can policymakers design better industrial policies that promote innovation without leading to an inefficient subsidy race? And how can data and empirical analysis help to rigorously evaluate the extent and impact of industrial policy?

Effective Green Industrial Policy – the Role of Data, Digitalisation, and Standards

1. Panel: Driving Low-Carbon Innovation for Climate Neutrality

Antoine Dechezleprêtre (OECD) presented OECD data on innovation in the green tech and low carbon sector. He highlighted the necessity of moving fast towards a net-zero economy in order to reach the Paris climate goals, but also showed that patent counts in green technology as well as venture capital investments do not match the challenge. In order to meet the net-zero target, public investment in research and development (R&D) of low-carbon technology needs to increase fast. Following his presentation, Eugenie Dugoua (London School of Economics) and Tobias Lechtenfeld (1.5° Ventures) discussed the reasons behind the lack of innovations and funding and focussed on how to overcome these challenges. The panel was moderated by Nils Handler (d\carb future economy forum).

2. Panel: Green Industrial Policies: Identification and Quantification

In her presentation, Chiara Criscuolo (OECD) presented the first analytical results of the OECD’s Quantifying Industrial Strategies (QuIS) project. Based on a new methodological framework, this project takes stock of industrial policy expenditures in various countries with a harmonised methodology. This has allowed for country-specific analysis and cross-country benchmarking. In the discussion, Bernhard Kluttig (Federal Ministry for Economic Affairs and Climate Action), Philip A. Luck (US Department of State) and Josefina Monteagudo (European Commission) explored, how quantification methods can be used to understand, evaluate and compare industrial strategies across countries. The panel discussed how the Inflation Reduction Act, implemented by President Biden’s administration, compares with the European Union’s plan to promote a more sustainable economy and zoomed in on German efforts to attract the chips industry to its shores. The panel was moderated by Cathryn Clüver Ashbrook (Bertelsmann Foundation).

3. Panel: The Role of Standards for the Green and Digital Transformation

The session was opened with an introduction by Laurie E. Locascio (National Institute of Standards and Technology and US Department of Commerce), who presented the recently announced US National Standards Strategy for Critical and Emerging Technologies. In the discussion that followed Gwen Cozigou (European Commission), Knut Blind (Fraunhofer ISI), Nigel Cory (Information Technology & Innovation Foundation) and Thomas Zielke (Federal Ministry for Economic Affairs and Climate Action) compared the different approaches to technological standards in the US, the EU and Germany. There was broad agreement that standards can promote innovation, promoting the green and digital transitions of the economy, in particular when countries work together to develop standard setting methodologies that work for all. The panel was moderated by Nicola Brandt (OECD).

4. Panel: The Green Transition and Artificial Intelligence – Friend or Foe?

In her presentation, Lynn Kaack (Hertie School Berlin) explained, how AI applications are contributing to green house gas emissions, how these emissions can be reduced and how AI can be used effectively to mitigate more emissions than they produce. Especially large resource efficiency gains can be made in the prediction of irregular events and designing of complex structures. In order to maximize the positive impact of AI, Lynn Kaack presented three policy approaches: Fostering applications that help address climate change, requiring transparency and accountability in cases where AI could increase emissions and incorporating a climate focus in technology assessment for AI and AI-driven technologies. In the discussion Mei Lin Fung (People-Centered Internet), Stefanie Kunkel (Research Institute for Sustainability) and Anne Mollen (AlgorithmWatch) focused on ways, digitalization can promote the green transition for example by facilitating more effective supply chain management, but also underlined that the development of algorithms needs to incorporate energy efficiency by design. The panel was moderated by Cornelia Woll (Hertie School Berlin).

Closing Keynote: Green Innovation: The most Powerful Engine to keep the Climate from Changing

The final presentation was given by Ufuk Akcigit (University of Chicago), who was briefly introduced by Sugandha Srivastav (Oxford Smith School). Ufuk Akcigit addressed various drivers of innovation and argued that technological innovation and better management can bring about growth that is both inclusive and compatible with efforts to address the world’s climate emergency. He called out a bias towards already existing technologies and emphasized the need for investments into R&D both from the public and the private sector.




Further readings:

Quantifying industrial strategies across nine OECD countries Criscuolo, Díaz, Guillouet, Lalanne, van de Put, Weder, and Deutsch (June 2023)

Are industrial policy instruments effective? OECD (May 2022)

Aligning artificial intelligence with climate change mitigation Kaack et. al. (June 2022)

An industrial policy framework for OECD countries OECD (May 2022)