Green Developmental Statecraft: The International Dimension of Green Structural Transformation in the Global South

Over the past 12 months, efforts to tackle a warming planet have lost momentum. There has already been a dialing back on climate initiatives at the Western-led Bretton Woods Institutions and by private financiers, with meaningful progress on the climate financing challenge stalling at the very moment greater effort is urgently needed. As a result, global carbon emissions are on track to reach new highs while the economic damage from climate-related shocks climbs to hundreds of billions of dollars annually.

Against this backdrop, a new report by the Boston University Global Development Policy Center looks at how to better combine the national and international dimensions of green structural transformation (GST) in the Global South. For most developing countries, this transformation involves a triple movement of diversifying their economy (with industrialization a priority for most), decarbonizing their energy supply, transportation system and production processes and adapting to increasingly damaging climate shocks.

An increasing number of countries in the Global South are willing to launch a big investment push to support a GST. But tackling potential obstacles and constraints will require a more active policy agenda, a break with austerity and a whole of government approach. Repairing and enhancing state capacity with these aims in mind is an urgent task for many.

This report advances a four-pronged political economy strategy to successfully advance green developmental statecraft in the international system.

Policy recommendations:

1. Nation-states will need to invest in domestic state capacity and create incentives for the “new winners” of the green structural transformation in their economies over domestic and foreign incumbent interests;
2. Developing countries will need to reinvigorate South-South cooperation by creating and expanding Southern-led development finance institutions, trade and investment agreements and financial safety nets;
3. A South-South framework, including regional strategies, will also help developing countries to better engage with China. China offers insights on how to build state capacity and has some of the most cutting-edge technologies for green structural transformation. Collective engagement with China to maximize the benefits of its green cooperation strategies and minimize their risks is essential;
4. Countries in the Global South will need to strengthen coalitions for reform of the international financial architecture (IFA) and global trade regime. The market power of the Global South, in addition to a series of policies and alternative institutions to the legacy institutions across the IFA, can lever more ambitious reforms of the IFA and help create a more balanced and effective global economy.

The urgency and enormity of the challenge for governments across the Global South to meet the triple movement of diversification, decarbonization and adaptation cannot be understated; institutional and policy changes at the domestic level, with a big investment push at the center, will be key. But it is the responsibility of the key international actors to ensure that the Global South receives necessary support to meet this challenge, and this report lays out a blueprint for how global economic governance can be overhauled to facilitate that.