Green Industrial Policy and Open Government

If governments are steering economies, who’s in the driver’s seat? Governments are using outdated methods to grow or protect parts of their domestic economy. Open government is essential in helping things go right as green industrial policy is implemented.

Credit: Znynek Burival

By Luc Tezenas, Resource Justice Network and Joseph Foti, OGP

Governments are spending enormous sums of public money to reshape their economies. The EU’s Clean Industrial Deal aims to mobilize over €100 billion for clean manufacturing. China’s industrial policy spending is estimated at $248 billion in a single year. Mexico is investing $277 billion in value-added processing through Plan Mexico and has renationalized key parts of the energy and oil sectors. In the United States, recent legislation such as the Inflation Reduction Act (IRA), the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act represents the largest investment in the country’s industrial base since the postwar era. (During the Trump era, this has expanded to the government owning large shares of at least ten major companies and threatening to destroy other national champions.) Even the World Bank, usually a major proponent of free markets, recognizes that countries large and small are getting into industrial promotion.

This is a big deal for the open government community. Big amounts of money are flowing through public institutions, often fast, into the hands of private firms. Who gets it, on what terms, and whether it delivers matters. Arguably, many of our tools, around open budgets, open contracting, and beyond, matter more than ever. But they also need to be updated when the government, and citizens,become the largest shareholder.

This is the second in a series with Resource Justice on open government and the green transition. The first piece covered just transition basics. This blog will explore the policy toolkit governments are using to reshape their economies and why transparency and accountability need to keep pace.

What is industrial policy?

Industrial policy is the deliberate steering of economic activity by governments. It is an old idea. Governments have always used public spending, regulation, and incentives to favor certain industries, regions, or technologies over others.

For the past few decades, the conventional economic wisdom was that this is usually a bad idea. The “Washington Consensus,” was that governments should limit themselves to correcting market failures and otherwise let markets allocate resources. Industrial policy was considered vulnerable to rent-seeking and regulatory capture: politically connected firms would grab subsidies and bureaucrats would fail to pick winners.

That conventional wisdom has shifted considerably. As economists Réka Juhász, Nathan Lane, and Dani Rodrik argue in a landmark review, a growing body of rigorous evidence now offers a more positive take. The earlier critique was not wrong about the risks: capture and waste are real. But the conclusion that governments should simply stay out has not held up. Governments are increasingly taking over industries or picking favorites to grow their economies, resulting in lower unemployment, a response to climate change, or to protect strategic national interests.

The challenge for open government is that regulatory openness, which has been a strong suit of governance reforms over the last few years, simply doesn’t cover the broad range of ways that governments are intervening in the economy. As Alondra Nelson observes in *Science*, even governments that describe their approach as deregulatory are intervening heavily. They just use different tools. In energy, trade, and manufacturing, government power has not retreated. It has moved into subsidies, procurement, financial instruments, and regulatory standards.

The question then shifts from whether governments should engage in industrial policy, to whether they do so deliberately, transparently, and with accountability.

The green industrial policy toolkit

How are governments actually steering the green transition? The toolkit is varied, but four categories matter most.

Planning and processes. Governments need processes that help define the problem and set priorities before money is committed. These may include local, national and regional industrial strategy forums, transition councils, worker and community tables, public hearings, and multi-stakeholder planning bodies. This can and should be a core part of the green industrial policy toolkit. Participation helps ensure that industrial policy is contextualised, grounded in local realities, and able to build public ownership.

Subsidies and tax incentives. The US Inflation Reduction Act gave $270 billion in tax credits for clean energy production, electric vehicles, and battery manufacturing. While much of this has been cancelled under the Trump administration, that does not mean that industries are not being favored with subsidies. The EU continues to move in a greener direction, loosening subsidy rules to support clean technology manufacturing across member states. The governance question is what public-interest conditions come with public support. If governments are using public money to reduce private risk, they should require clear, disclosed, and enforceable returns: job quality, skills and training, local value addition, technology access, reinvestment, community benefits, and environmental safeguards. These conditions should be backed by enforcement tools: clear milestones, repayment if promises are broken, and public sharing in the upside when public money creates private gains.

For example, India’s Production Linked Incentive scheme for solar manufacturing aims to build 48 GW of domestic production capacity, reduce dependence on imported panels, and create a domestic supply chain from polysilicon to finished modules. As of mid-2025, the scheme has driven 18.5 GW of module capacity and attracted roughly $5.5 billion in investment.

Public procurement and state ownership of enterprises. In the EU, state-owned development banks and public procurement mandates are central to the clean energy buildout. In resource-rich developing countries, state-owned mining and energy companies are often the primary vehicle through which governments manage the transition and through which public value can be captured or lost. This makes transparency over mandates, procurement decisions, investment criteria, and performance especially important.

Trade policy: In resource-rich developing countries, the picture is different but no less interventionist. Many producer countries are using export controls and taxes, local content rules, and beneficiation requirements to capture more value from critical minerals. Indonesia’s nickel ore export ban,in place since 2020, is a textbook case of industrial policy through trade restriction. By banning raw ore exports and offering tax holidays of up to 20 years for domestic processing, Indonesia has transformed itself into the world’s dominant nickel processor, supplying roughly 60 percent of the world’s mined nickel and close to 45 percent of processed nickel. Similar policies are now spreading across African mineral producers, including Zimbabwe’s restrictions on lithium exports. As shown by the latter, trade tools can support domestic value addition, but only if they are backed by reliable infrastructure, skills, technology, predictable rules, and public monitoring. The open government question is whether their objectives, risks, and trade-offs are publicly debated and tracked over time.

Financial instruments. Green bonds, blended finance, and sovereign wealth fund investments are all expanding. In each case, public money is being used to reshape private markets at speed. The EU’s proposed Industrial Decarbonisation Bank draws from the Emissions Trading System and the Innovation Fund to channel €100 billion toward clean manufacturing. These instruments should be governed not only as financial products, but as public policy tools: with clear objectives, disclosed terms, measurable conditions, and accountability for who benefits.

• Brazil’s BNDES (the world’s largest financier of renewable energy) approved over R$7 billion for energy transition and green industry projects in 2024 alone, spanning solar installations, lithium mining, and green mobility.
• Meanwhile, a growing number of African governments are turning to green bonds to tap capital markets for climate investment. (Africa’s share of the global $2.2 trillion green bond market remains below one percent)
• Kenya’s Green Bond Programme is among the most developed, aiming to channel both domestic and international capital toward renewable energy, sustainable agriculture, and clean transport. In each case, public money is being used to reshape private markets at speed and the governance implications are the same regardless of the cost.

When does industrial policy work?

There is no single model of green industrial policy that works everywhere. What is effective depends on a country’s productive structure, fiscal space, administrative capacity, labour market, political economy, ecological constraints, and position in global value chains.

The underlying open government question is what the minimum governance content needs to be before major public support is committed. Consequently, this is not a checklist for a single “right” industrial policy model; it is a governance test for whether the policy has a clear public purpose, is adapted to context, and can be revised when evidence or public concerns change.

The evidence base on industrial policy design has improved significantly. Several principles emerge from the literature:

• Competition: Industrial policy works better when it induces competition within a sector rather than picking a single national champion. Competitive grant processes, where multiple firms and regions compete for funding against transparent criteria, reduce the risk of capture.
• Conditionalities: Mazzucato and Rodrik have argued that public investment should come with strings attached. In other words, there should be requirements on job quality, domestic content, profit-sharing, or reinvestment, depending on the goals of the support. The CHIPS Act, for example, limits stock buybacks and requires childcare for construction workers. The IRA offers bonus tax credits for projects that use domestic content or invest in disadvantaged communities.
• Adaptive management: As Rodrik has noted, successful industrial policy is not about picking winners; it is about letting losers go. This requires monitoring, evaluation, and the political willingness to redirect resources when something is not working.
• Portfolio approach: Evaluating industrial policy firm by firm is misleading. What matters is whether the overall portfolio of investments moves an industry or region in the right direction, with built-in tolerance for the fact that some bets will fail.

For open government, these principles point to a practical question: has the government made the policy’s public purpose, conditions, monitoring rules, and course-correction mechanisms visible before money or regulatory privileges are granted?

Where open government fits in

Each policy tools’ success depends on information being public and decision-making being accountable. Good industrial policy depends on a public sense of ownership. Countries have tried for decades to diversify away from extract-and-export models. The question is whether the next generation of industrial policy is legitimate: governed with participation, transparency, accountability, and remedy from the start. What follows are some of the key qualities of a democratically-controlled industrial policy.

Participation in diagnosis and design: Industrial policy works best when it is embedded in the real economy. That means participation should begin before sectors, regions, firms, or technologies are selected. Workers, affected communities, local governments, civil society, and domestic producers should help define the problem, assess trade-offs, and identify what kind of diversification is actually needed. OGP’s multi-stakeholder model is one practical way to structure this participation.

Transparency of industrial policy tools: Who receives subsidies and on what terms? Are procurement processes competitive and documented? Are the subsidy and loan conditionalities attached to public investment being met? Open contracting standards, subsidy registries, and beneficial ownership disclosure can make these flows visible. They can also show whether public support is aligned with stated public goals, such as local value retention, job creation, technology transfer, or community benefit.

Accountability of public investment. If governments are investing trillions in the green transition, citizens need to know whether that money is delivering. Budget transparency, audit institutions, and independent evaluation are all areas where the OGP community has deep experience. Applied to green industrial policy, this means tracking whether tax credits reach their intended beneficiaries, whether conditionalities are enforced, and whether promised jobs and environmental benefits materialize. In addition, it means publishing performance data and having independent auditors evaluate the performance of a given investment portfolio.

Demonstrable benefit-sharing: Where public support is tied to extractive, energy, or infrastructure projects, governments should publish how revenues, jobs, community benefits, environmental obligations, and energy arrangements are allocated and monitored. This includes fiscal terms, subsidy and guarantee conditions, local employment commitments, community development obligations, environmental monitoring reports, and, where relevant, power purchase agreements. Citizens should be able to assess whether publicly supported projects are delivering affordable energy, decent work, environmental protection, value retention, and visible benefits to affected communities.

Remedy and course correction: Open government should also make it possible to challenge bad decisions. Communities and workers need accessible channels to raise concerns, contest harms, and trigger review when projects fail to meet social, environmental, or economic commitments.

What comes next

Green industrial policy is moving fast. Given the velocity and volume of money, the risks of capture, waste, and inequity are real, and technocratic diversification plans never build enough public ownership to last.

Our community has spent the last few decades developing tools to address these issues in the extractives sector and in public spending. Now those two issue areas are closer than ever. The open government challenge is to ensure that green industrial policy is participatory, contextualized, and contestable from the start.

Luc Tezenas is a Head of Policy and Advocacy at the Resource Justice Network. The Resource Justice Network (formerly Publish What You Pay) works on the governance of natural resource extraction and the accountability of resource revenues.