Green Productive Development Policies for Argentina

This document analyzes the opportunities open to Argentina and the challenges it faces in developing a green productive development policy agenda that will foster dynamic, environmentally sustainable firms and sectors. It explores the possibilities for a form of productive transformation that will boost economic development while also allowing the country to meet the commitments it took on by signing the Paris Agreement.

The paper begins by outlining an analytical framework that addresses Argentina’s challenges from a green productive development policy perspective. It goes on to review other countries’ experiences with promoting “green” sectors such as nonconventional renewable energy, electric mobility, and hydrogen. This comparative perspective reveals that countries such as the United States, Germany, China, Brazil, and Chile are implementing green productive development policies with the dual objective of contributing to economic growth and transitioning to lower-carbon economies. Stimulus policies in the nonconventional renewable energy, electric mobility, and hydrogen sectors have included instruments on both the supply side (support for R&D, concessional financing, subsidies, preferential tariffs, tax incentives, and domestic content requirements) and the demand side (subsidies, tax reductions, and public procurement requirements).

This analysis of the situation in Argentina reveals that although there are sector-specific regulatory frameworks and stimulus instruments in place that are similar to those reported internationally, technological, economic/financial, and political/institutional challenges remain. These mainly revolve around the high capital requirements for infrastructure investment in a context of serious difficulties in access to financing, resistance to change on the part of established stakeholders at the sector level, and the kinds of difficulties with coordination and regulatory frameworks that are often associated with high costs and complex administrative issues. Likewise, the macroeconomic environment and complex global context are limiting the launch of innovative businesses.

Despite these circumstances, local companies such as IMPSA Wind, INVAP, E-Motion22, Volt Motors, and Hychico suggest that Argentina has some degree of productive capacity within the wind value chain, is exploring innovative niches in the automotive sector that could contribute to the transition toward electric mobility, and is pioneering experiences in the hydrogen sector. Most of the companies analyzed in this paper have developed innovation capacity in other sectors and have long export trajectories, well-established engineering departments, and experience in R&D.

The paper identifies some of the factors that should be taken into account as part of an ambitious, long-term green productive development policy agenda for Argentina. These include strengthening R&D at the firm level, promoting sector-specific working groups at the value chain level, identifying specific niches in which the country has competitive international potential, creating specific financial instruments, improving engineering education, creating incentives for “pioneer exporters,” supporting public procurement frameworks with a focus on promoting innovation, evaluating the costs and benefits of increasing national content requirements, implementing specific training programs, and drafting an energy transition strategy from a productive perspective that includes realistic goals and indicators for evaluating progress and setbacks.

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