Green Industrial Policy: Trade and Theory

33 Pages Posted: 20 Apr 2016

See all articles by Larry S. Karp

Larry S. Karp

University of California, Berkeley

Megan T. Stevenson

George Mason University - Antonin Scalia Law School, Faculty

Date Written: October 1, 2012


This paper studies the reality and the potential for green industrial policy. It provides a summary of the green industrial policies, broadly understood, for five countries. It then considers the relation between green industrial policies and trade disputes, emphasizing the Brazil-United States dispute involving ethanol and the broader United States-China dispute. The theory of public policy provides many lessons for green industrial policy. The authors highlight four of these lessons, involving the Green Paradox, the choice of quantities versus prices with endogenous investment, the coordination issues arising from emissions control, and the ability of green industrial policies to promote cooperation in reducing a global public bad like carbon emissions.

Keywords: Climate Change Economics, Environmental Economics & Policies, Climate Change Mitigation and Green House Gases, Energy Production and Transportation, Economic Theory & Research

Suggested Citation

Karp, Larry S. and Stevenson, Megan, Green Industrial Policy: Trade and Theory (October 1, 2012). World Bank Policy Research Working Paper No. 6238. Available at SSRN:

Larry S. Karp (Contact Author)

University of California, Berkeley ( email )

Dept. of Agriculture & Resource Economics
313 Giannini Hall
Berkeley, CA 94720
United States
510-643-8911 (Fax)

Megan Stevenson

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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