The Global South in the Energy Transition: A Framework for Industrial Policy Options to Avert “Greening Dependency”

Abstract

The global energy transition is leading to a new division of labor in renewable energy production and economic activity in the associated value chains. As trade in renewable energy becomes more technologically feasible and economically viable, it is likely that different countries will focus on different steps in the energy transition value chains, such as the green hydrogen and lithium battery value chains. While industrialized countries are mainly looking to source low-cost renewable energy and critical raw materials in the Global South to green their industries, the benefits for developing countries are less clear. We ask what kind of green industrial policies would be relevant for developing countries to reap more benefits of the global energy transition than reinforcing traditional patterns of commodity exports to the global North. For this, we link the recent debate on green industrial policy to new concepts of developmentalist thinking. We develop a framework to relate specific policies to two distinct neo-developmentalist approaches: one more oriented towards domestic economic diversification and income redistribution, the other one more towards technologically upgrading green energy-linked exports to global markets, thus advancing the economic complexity of the country. Applying recent concepts of industrial policy, we take a broad stance and include macroeconomic and financial policies. We demonstrate that this framework can be used to evaluate green transition strategies and outcomes of countries in the global South with different degrees of economic complexity and size regarding their contribution to economic development.