Government intervention in climate-friendly industries: Lessons from the Danish wind turbine industry and organic food industry

Summary

Government intervention in green infant industries may be justified as a strategy to reduce the emission of green house gases. How should government policies be designed to promote such industries? One way to analyse this question is to compare government intervention in green infant industries in which it has been successful with green infant industries in which it has been less successful. The Danish government has intervened intensively in the wind turbine industry and organic farming sector mainly for environmental reasons since 1992 and 1987 respectively, but with very different impact. While the market share of wind turbine energy reached 20 percent in 2007, organic food consumption lags behind with a market share of 6.5 percent in 2006. This paper compares the packages of policy instruments applied in the two industrial sectors and analyses whether differences in instrument choice may explain the significant differences in market shares. It is demonstrated that government intervention in the wind turbine industry has emphasised the use of policy instruments designed to increase demand for wind turbine energy, whereas organic farming policy has put more
emphasis on instruments motivating farmers to increase supply. This may be the key factor explaining variance in
growth. Recently, it has been realised that organic farming may have significant potential to mitigate global farming.
Therefore the paper analyses whether the lessons learned from government policy aimed at promoting the wind turbine
industry can be transferred to organic farming policy.