Briefing Paper

Research Director, Energy, Environment and Resources
Senior Research Fellow and Deputy Research Director, Energy, Environment and Resources

The task of decarbonization is essentially one of industrial policy, though not confined to the industrial sector. Governments must develop national transformation strategies, build effective institutions and intervene in markets to create and withdraw rents while avoiding policy capture.

Stuck in Transition: Managing the Political Economy of Low-carbon DevelopmentPhoto by toos/iStock.

Summary points: 

  • The task of decarbonization is essentially one of industrial policy, though not confined to the industrial sector. Governments must develop national transformation strategies, build effective institutions and intervene in markets to create and withdraw rents while avoiding policy capture.
     
  • In poor countries, the principal challenges are low levels of government capacity and a lack of economic resources. For rich countries the challenge is primarily political: governments must pursue policies that are discounted by their populations and confront powerful incumbent interests.
     
  • Bundling mitigation with existing policy priorities and highlighting co-benefits provides governments with a way to manage political risk. However, rapid decarbonization requires governments to make emissions reduction a policy priority.
     
  • Piloting provides an important way for governments to work with the private sector, demonstrate success, overcome opposition and avoid policy deadlock. As such, piloting is more than a technical exercise; it is a political project.
     
  • The costs of low-carbon technologies are falling fast and the green economy is expanding. Increasingly, the key challenge for governments – of avoiding highcarbon lock-in – is one of strategic choice rather than affordability.