Rent Management – The Heart of Green Industrial Policy

Abstract

At the heart of green industrial policy is rent management: government creating and withdrawing opportunities for highly profitable investment. This paper asks what the key factors are for rent management to succeed. Drawing on a range of literatures the paper first deals with the critical success factors for ‘normal’ rent management and then turns to one of the most pressing and controversial issues of our time: how to bring about the transition to renewable energy. This is extra challenging because technological uncertainties are high, time horizons for investment are long, yet action is required now. The paper suggests that responding to these challenges requires above all a political approach to rent management. The critical success factors for managing such policy rents are those that enable it to mitigate four risks: political capture by private investors and allied policy makers; choosing the wrong instruments; targeting the wrong sectors or technologies; and doing too little. The paper concludes that a public-private-civic alliance is needed to deal with the most fundamental risk of governments doing too little and not achieving the scaling up of green investment.