Should Green Industrial Policy Be Technology Neutral?

Abstract

The central question of this paper is whether technology neutrality is, on balance, a helpful principle for green industrial policy (GIP). To answer this question, we first conduct a systematic literature review to understand what GIP is. We find that the term is most often used by authors in a neoclassical economic tradition and propose a definition that encapsulates the dominant elements of various definitions in this literature. Using a transdisciplinary approach, we turn to the question of technology neutrality in GIP. Considering a range of disciplinary perspectives and arguments, we conclude that the weight of argument and evidence lies strongly against de jure technology neutrality in GIP. Furthermore, the literature provides a range of alternative principles and approaches that can better address potential government failures in GIP and related policies. Finally, combining theoretical approaches and case-study evidence from the US Inflation Reduction Act and the European Union's Carbon Border Adjustment Mechanism, we provide potential explanations for why technology neutrality nonetheless remains a popular principle in GIP.