Full Title: Green Industrial Policy Trade and Theory
Author(s): Larry Karp, Megan Stevenson
Publisher(s): The World Bank Development Research Group Environment and Energy Team & Sustainable Development Network Office of the Chief Economist
Publication Date: 10/2012
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This paper studies the reality and the potential for green industrial policy. It provides a summary of the green industrial policies, broadly understood, for five countries. It then considers the relation between green industrial policies and trade disputes, emphasizing the Brazil- United States dispute involving ethanol and the broader United States-China dispute. The theory of public policy provides many lessons for green industrial policy. The authors highlight four of these lessons, involving the Green Paradox, the choice of quantities versus prices with endogenous investment, the coordination issues arising from emissions control, and the ability of green industrial policies to promote cooperation in reducing a global public bad like carbon emissions.