Green industrial policy to power a green recovery

Green industrial policy to power a green recovery

Interview with Li Yong, Director General of the United Nations Industrial Development Organization

12 Aug 2020


The COVID-19 pandemic has brought unprecedented challenges and caused an exceptional economic downturn. It is foreseen that the global economy will shrink by 3-6% in 2020, resulting in losses of manufacturing production, an increase in unemployment and rising poverty. An estimated 71 million people are expected to be pushed back into extreme poverty according to the Sustainable Development Goals Report 2020, with decades of precious development progress potentially being reversed. 

In this interview, LI Yong, Director General of the United Nations Industrial Development Organization (UNIDO), discusses how targeted green industrial policies and investments in green industries can lead to the structural changes necessary to recover from COVID-19, with opportunities to boost sustainable economic growth and create jobs in line with the goals of the Paris Agreement on Climate Change and the 2030 Agenda for Sustainable Development.

A green recovery is one thatfirst of all—promotes economic recovery. How can green industrial policy and investments in green industries help countries to recover from the current economic crisis?

Countries are adopting exceptional measures to tackle the health and economic consequences of COVID-19. Our response now will shape our societies and economies for the future, and governments will need to invest more than $20 trillion over the next 20 years to meet climate and sustainable development objectives. It is therefore encouraging that many political leaders and civil society movements are calling for a “green recovery and transformation.”

This is where green industrial policy comes in. It refers to government measures that aim to accelerate the structural transformation of industry and the wider economy towards becoming low-carbon and resource-efficient in ways that also enhance productivity and promote comparative advantage for industries and the economy as a whole. Adopting green standards and certifications, for example, enables firms to differentiate their products from those of their competitors—putting those firms or countries in a comparatively advantaged position. Investments in green industries can generate a higher economic impact than less sustainable expenditures in other sectors; this creates more job opportunities and strengthens poverty alleviation benefits, which are so important for the green recovery that we aim for.

How can green industrial policy and investments in green industries support countries to more effectively address the greater environmental challenges lying ahead?

Greenhouse gas emissions from industry continue to increase, and are among the top three sources by economic sector. Targeted green industrial policies, particularly those that accelerate the shift of resource- and carbon-intensive sectors onto greener trajectories, can play a central role as we work together to address the climate emergency. In this regard, the announcement of stimulus recovery packages during the COVID-19 crisis provides a once-in-a-lifetime opportunity to re-write the traditional code of practice and advance a so-called “Green Industrial Revolution” at low economic and political cost.

Some countries are taking advantage of this window. The European Commission, for example, is pushing its European Green Deala set of policy initiatives designed to make Europe climate neutral by 2050at the centre of its recovery strategy. Germany, meanwhile, has directed funds towards electric mobilityan important move towards a climate-friendly transport and energy policy.

By investing in technologies to control emissions and developing new clean technology industries, countries can build resilience to and limit further climate damage—as well as boost their competitiveness in the global greener economy of today and tomorrow.

What green industrial policy measures and tools can countries deploy in the short- and long-term to respond to these crises?

First of all, it is important to remember that no two countries are alike. Policies need to be designed according to the specific circumstances of the country, to maximize benefits while managing potential risks.

As an immediate response, countries should look to maintain their existing industriesin particular green industriesand their jobs, while also ensuring that state aid is linked to stringent social and environmental conditions. For example, countries may adopt innovative policies that seek to reactivate production and supply chains, and incentivize business restructuring to build, diversify, and re-orient productive capabilities in order to increase resilience to future shocks. An early example is the support that UNIDO provided to Armenia. This support was aimed at addressing the increased demand for facemasks in the country, by linking three apparel manufacturers that diversified into mask production in collaboration with the national health authorities.

As the next step, targeted green industrial policies that foster innovation and circularity should be at the forefront to build sustainable and resilient manufacturing against future disruptions. To achieve this, investments in green technologies and resource efficiency tools will be key as we identify new alternatives for the organization of global production networks and value chains.

How can capacity building and learning provide the necessary building blocks for a resilient, green economic recovery and transformation? 

Enhancing knowledge and developing skills play a major role in ensuring that a green recovery is both equitable and socially inclusive. It is important that countries have a strong knowledge base in order to assess the effects of actions being taken by governments. For example, civil servants will need to analyze and understand the impacts of renewable energy promotion on green jobs. Industry associations will need to be aware of the cost and benefits of trading environmental goods with local companies.

Education and building the capacities of the public and all relevant stakeholders are vital for a green recovery and transformation. Clear government commitment, supporting leadership throughout the public sector, and a well-defined strategic vision should be in place to support macroeconomic objectives. This is why PAGE’s new Green Industrial Policy e-course—which is designed to advance learning on green industrial policy at a high technical levelis an excellent tool, and can be a key resource for countries as they plan their economic responses to COVID-19.

PAGE’s new course on Green Industrial Policy: Promoting Competitiveness and Structural Transformation, has been developed by the United Nations Industrial Development Organization (UNIDO), United Nations Environment Programme (UNEP), and United Nations Institute for Training and Research (UNITAR), and forms part of PAGE’s “Learning for a Green Recovery” initiative. The course, and others in this new series, can be taken online at UNITAR’s UN CC:e-Learn platform.