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Picture Courtesy: Down to Earth

Context:

Green industrialisation is rapidly becoming the organising principle of global economic strategy, yet the international climate regime, anchored in the United Nations Framework Convention on Climate Change (UNFCCC) has not meaningfully integrated this shift, creating a growing mismatch between climate governance and real-world decarbonisation pathways.

Current status of green industrialisation:

• Green industrialisation is essential for achieving climate targets, as the energy and industrial sectors together account for nearly 70% of global greenhouse gas emissions, and around 90% of emissions reductions required by 2050 depend on the large-scale deployment of clean technologies
• Industrial policy is now central to climate action, as governments worldwide announced over USD 1.7 trillion in public support and incentives for clean energy and green industries between 2020 and 2024, reflecting a clear shift away from market-only approaches to state-led green industrial strategies.
• Green industrialisation is reshaping global trade, as clean energy technologies already represent over USD 650 billion in annual global trade, and this figure is projected to more than triple by 2035, driven by solar PV, batteries, EVs, and hydrogen-related equipment.
• Critical minerals have emerged as a strategic constraint, with demand for lithium expected to rise by over 40 times, cobalt by 20–25 times, and nickel by 15–20 times by 2040, under net-zero pathways

What is Green Industrialisation?

Green industrialisation refers to a development strategy in which countries build, expand, and transform their industrial base in ways that are low-carbon, resource-efficient, and environmentally sustainable, while also generating jobs, income, and economic resilience. It combines industrial policy with climate and environmental objectives, ensuring that economic growth and decarbonisation proceed together rather than in conflict.

Key Components

Green industrialisation involves the deliberate use of policy tools—such as subsidies, public procurement, standards, trade measures, and finance—to promote:

• clean energy and clean-technology manufacturing
• energy-efficient and low-emission industrial processes
• circular economy practices like recycling and reuse
• domestic value addition and skilled employment
• reduced dependence on fossil-fuel-based growth models

What are the broader implications of green industrialisation?

Economic Implications: Green industrialisation reshapes growth models by shifting investment towards clean manufacturing, renewable energy, and low-carbon infrastructure, while generating new employment opportunities and value chains. It enhances industrial competitiveness, export potential, and supply-chain resilience, but also demands high upfront capital, fiscal support, and long-term policy certainty.

Climate Implications: By promoting clean technologies, energy efficiency, and circular production systems, green industrialisation directly supports emissions reduction, pollution control, and resource conservation. However, it also raises concerns around land use, water stress, mining of critical minerals, and lifecycle environmental impacts if sustainability safeguards are weak.

Employment Implications: Green industrialisation creates new jobs in renewables, EVs, batteries, hydrogen, and recycling, while enabling skill upgrading and workforce formalisation. At the same time, it can lead to job displacement in fossil-fuel-dependent sectors, making reskilling, social protection, and a just transition essential to prevent inequality and social unrest.

Developmental Implications: For developing countries, green industrialisation offers a pathway to combine climate action with poverty reduction, industrial diversification, and economic resilience. Without adequate policy space, finance, and technology access, however, it risks reinforcing dependency on imported green technologies rather than fostering domestic manufacturing capabilities.

Technological Implications: It accelerates innovation in clean energy, storage, materials, and manufacturing processes, strengthening national technological capabilities. At the same time, intellectual property regimes and technology concentration in advanced economies may limit technology diffusion to the Global South.

What are the challenges in the implementation of green industrialisation?

Investment constraints: Green industrialisation requires large upfront capital investment in clean technologies, infrastructure, and R&D, while returns are often long-term and uncertain. Developing countries face high cost of capital, limited access to concessional finance, and inadequate global climate finance flows, making large-scale green manufacturing financially risky.

Limited policy Space for developing countries: Trade rules, investment agreements, and intellectual property regimes often restrict the use of subsidies, local content requirements, and technology-sharing mechanisms. While advanced economies actively deploy industrial policy, many developing countries operate under tighter multilateral constraints, creating an uneven playing field.

Technology access and capability gaps: Key green technologies such as advanced batteries, electrolysers, and power electronics are concentrated in a few countries. Limited technology transfer, strict IPR regimes, and weak domestic R&D ecosystems hinder the ability of late-industrialising countries to build competitive clean manufacturing capabilities.

Supply-Chain and Critical Minerals Dependence: Green industrialisation depends heavily on critical minerals like lithium, cobalt, nickel, and rare earths, whose extraction and processing are geographically concentrated. This creates vulnerabilities related to price volatility, geopolitical risk, environmental degradation, and social conflict in mining regions.

What are the key measures requiring for the success of green industrialization?

• Coherent industrial policy framework: A clear long-term industrial vision is essential to guide investment into clean manufacturing sectors such as renewables, EVs, batteries, hydrogen, and green materials. India has begun aligning industrial policy with climate goals through initiatives like Make in India, which increasingly prioritises clean and strategic sectors, and sector-specific roadmaps under the National Manufacturing Policy. 

• Affordable and scaled-up green finance: Green industrialisation demands large upfront capital and patient finance. India is addressing this through blended finance, public-sector lending, and risk-sharing mechanisms via institutions such as the National Bank for Financing Infrastructure and Development (NaBFID), sovereign green bonds, and increasing focus on climate-aligned finance under India’s commitments to the Paris Agreement. 

• Production-Linked Incentives (PLI) for clean technologies: Targeted fiscal support is crucial to overcome initial cost disadvantages. The Government of India’s PLI schemes for solar PV modules, advanced chemistry cell (ACC) batteries, EV components, and green manufacturing directly support domestic value addition, scale economies, and export competitiveness. 

• Reliable green infrastructure and energy systems: Green industries require assured access to clean power, storage, transport, and logistics. Initiatives such as the National Green Hydrogen Mission, expansion of renewable energy parks, grid modernisation under Green Energy Corridor, and investment in industrial corridors strengthen the backbone for low-carbon manufacturing. 

• Technology development and domestic innovation: Reducing dependence on imported clean technologies requires investment in R&D and innovation ecosystems. Government programmes such as Mission Innovation, support through DST, CSIR, and startup incentives under Startup India help build indigenous capabilities in clean energy, materials, and industrial processes. 

Conclusion:

Green industrialisation represents a decisive shift in development thinking by integrating economic growth with climate action and environmental sustainability. It recognises that decarbonisation cannot succeed without building domestic industrial capabilities, creating green jobs, and restructuring global supply chains. For countries like India, green industrialisation offers a pathway to achieve climate commitments while strengthening manufacturing competitiveness, energy security, and inclusive development. Its success ultimately depends on coherent policies, adequate finance, technological innovation, skilled human capital, and effective global cooperation to ensure a just and equitable transition.

Source: Down to Earth