The OECD's conceptual framework for industrial policy uses a broad definition of industrial policy and considers a vast set of policy instruments, ranging from intellectual property protection to public support to improve workers' skills. This framework has already been used by the OECD in recent reports on the design of industrial strategies for the green transition as well as the net-zero transition of the Dutch manufacturing sector and the analysis of green hydrogen strategies. The framework has also been employed by the French administration in the development of the new "France 2030" industrial strategy (link in French).

The framework highlights two main dimensions of the formulation of industrial strategies: designing an industrial strategy and selecting policy instruments to execute that strategy.

The design of the strategy depends on its overarching objective, which will provide the rationale for choosing its appropriate component industrial policies.

Sound policy making requires a clear view on what works and what does not. Leveraging the framework, the OECD provides a synopsis of the available empirical evidence on industrial policy instruments, including their complementarities and trade-offs. Well-designed economic incentives for firms and good framework conditions can be effective in achieving the industrial strategy’s objectives.

At the same time, there is still limited evidence on the effectiveness of demand-side instruments, the complementarities between policy instruments, and the effects of industrial policy on resilience, inclusiveness, and the environmental and social performance of firms. As a result, governments need to put a strong emphasis on evaluation and the regular reassessment of industrial policies.

Measuring industrial policy expenditures is a first step towards ensuring transparency and accountability and enabling policy evaluation. It also supports cross-country comparability of industrial policies, facilitating international coordination on global challenges. The OECD gathers harmonised data that allows for the benchmarking of industrial strategies across countries in terms of industrial policy expenditures, policy priorities, policy instruments, and recipients.

This analysis across nine OECD countries found that industrial policies are sizable (1.4% of GDP on average). While there is a significant degree of heterogeneity in the format and priorities of this support, these expenditures are dominated by a sectoral approach. This sectoral support tends to support energy, transport, and manufacturing. Green instruments are increasingly important and are largely sector and/or technology specific.

Green industrial policies are increasingly considered a necessary part of the solution to keeping climate targets within reach, by accelerating the development and deployment of green technologies. Such policies can accelerate decarbonization by lowering constraints on access to finance, improving access to skills and infrastructure, reducing regulatory barriers for new entrants, stimulating demand for green products, and aiming to negate first-mover disadvantage.

The key question for policymakers is how to design them effectively to help accelerate emissions reductions while minimising risks to competitiveness, inclusiveness, and economic efficiency.