Should developing countries still attempt to industrialise in the context of the climate crisis?
A Political Economy Analysis
I) Introduction
In the current era of anthropogenic climate change, international climate commitments have necessitated ambitious measures to cut global greenhouse gas emissions (GHGs) by 2050. A key component of this effort is transitioning energy production and industrial processes to cleaner alternatives, which will demand substantial investments in infrastructure and workforce development.
Given the varying degrees of reliance on fossil fuels, the shift to net-zero emissions will impact countries, industries, and workers unevenly. Across all sectors and regions, the move towards a low-carbon economy will fundamentally reshape the global workforce, altering both job availability and skill requirements.
Unpacking the question of whether developing countries should industrialise while humanity is confronting an existential threat of the climate crisis does not reveal a simple ‘yes or no’ answer. This essay is premised on the intersection of how the need for a climate-compatible, or ‘green’ economic system, conflicts with the needs of the developing countries and their people, whose livelihoods depend on the extractive, ‘brown’ industries.
Through the lens of labour justice, this essay argues that developing countries are not faced with a simple choice of whether they should industrialise, but rather face the challenge of how to ensure economic stability under a climate crisis. It is worth noting that developing countries differ in their green industrial capabilities. Hence, this essay will focus on developing countries in Africa and Latin America, which have a significant dependence on extractive industries, primarily fossil fuels, as a source of jobs and export revenue.
The next section examines the uneven effects of the green transformation of the global economy on industrial employment in developing countries. Section 3 presents specific case studies of the workers’ perspectives from Africa and Latin America for contextual support of the main argument. Following this, section 4 discusses the emergence of a ‘just transition’ and its potential incorporation into policy mechanisms to address labour concerns.
II) The Global (uneven) Effects of Green Transformations
The climate crisis demands adaptation for developing countries as not just an option, but a necessity for survival. The past seven years were the warmest on record since 1850, and a 2°C rise could expose 37% of the world, mostly developing countries in the global south, to deadly heatwaves, worsen water scarcity, and drive conflict, displacement, and famine (Lebdioui, 2024; WMO, 2021a; Oppenheimer et al., 2019).
Globally, “green growth” paths and “low-carbon industrialisation” have become imperatives and common-sensical (Hickel et al, 2020). So, what does a ‘green transformation’ mean in the context of industrialisation and climate change? This essay assumes Lebdioui’s (2024) articulation of green transformation, which describes it as a climate-compatible industrialisation founded on new principles of resource efficiency and durability. It moves beyond methodological individualism (i.e., changing consumer behaviour) towards changing manufacturing practices that reduce the previous ‘brown’ material and energy used in the production process, such as fossil fuels, to ‘green’ technologies such as renewables (wind, solar energy, etc).
Green transformation is widely supported in existing academia and policy spaces as a ‘green window of opportunity’ and offers new directions for techno-economic development (Lema et al., 2020; Lebdioui, 2024; Pegels et al, 2020; Perez, 2016; Rodrik, 2014). Notwithstanding the complexity of this agenda, the labour market aspect of green transformation is particularly interesting for this essay. The employment-generating effect occupies a substantial space in the non-exhaustive list of benefits of green transformations (Lebdouidi, 2024). For example, green jobs could reach around 38 million by 2030, exceeding the jobs created by fossil-fuel industries (IRENA, 2021).
Under this techno-modernist paradigm, a singular fixation on the green transformation’s potential for job creation overlooks the ongoing reality of job destruction and its consequences for the working poor in developing countries. Despite the creation of new jobs, a political economist must ask: Where are these new ‘green’ jobs being created? Who benefits from these employment opportunities? And, what happens to workers in ‘brown’ jobs who are losing their livelihoods in the green transition?
Indeed, the green agenda has a socio-spatial dimension. Despite contributing the least to anthropogenic climate change, developing countries are highly vulnerable to climate and transition risks, both through extreme weather events and rising socioeconomic instability (Lebdioui, 2024; USGLC, 2021). Most developing countries, primarily in the global south (such as Africa and Latin America), have been dependent on extractive industries such as fossil fuels as a source of exports, revenue and jobs (Bandura & Bonin, 2024).
As the global economy decarbonises, leading to a sharp decline in fossil fuel demand, estimates suggest that over 2.7 million jobs in fossil fuel industries will be lost globally by 2030 (IEA, 2021). Figure 1 shows the uneven industrial geography of decarbonisation, where employment opportunities in the so-called ‘green’ jobs in renewable energy are concentrated in a handful of industrialised economies. Therefore, the green transformation (or decarbonisation) and its employment-generating ‘magic’ conceal a disproportionate impact on developing countries.
III) The Workers’ Realities
On the one hand, post-Keynesian, computable general equilibrium and input-output models have shown that the new, well-paid jobs in the ‘green’ industries can offset or even outweigh the jobs destroyed in the polluting industries (Baker et al. 2016; Pollitt et al., 2015). On the other hand, difficulties exist in relocating workers from ‘brown’ to ‘green’ jobs due to the substantial differences in skill requirements, geographical distribution (figure 1) and migration barriers. (Vona, 2019).
Figure 2 empirically illustrates that relative to other polluting industries worldwide, workers in fossil-fuel jobs have the least potential for inter-industry transfer with retraining. It shows that around 1.1 million jobs will be lost by 2030, out of which only 9% of workers can retrain for inter-industry employment.
Case Studies from Africa and Latin America
How and why are these job-killing arguments important for developing countries? Navigating the green transition in these countries is complex, as phasing down their fossil fuel industries leads to labour market disruptions and fiscal revenue challenges (Bandura & Bonin, 2024). A key factor contributing to the political unacceptability of climate policies is the threat to fossil fuel industries, which provide substantial employment and government revenue in developing countries (Vona, 2019).
For instance, the reform of fossil fuel subsidies (2012-present) is regarded as a crucial step towards greening the global economy, as reducing fossil fuel subsidies could significantly decrease GHG emissions by approximately 6% to 28% (Coady et al, 2019). Notwithstanding the environment-friendly rationale of this consensus, it is worth noting that this subsidy reform was primarily led by northern actors such as the IMF and World Bank (Lockwood, 2015), who exerted influence over the indebted countries of the global south through structural adjustment programmes (Skoygaard, 2018).
These reforms meant substantial unemployment for workers, reduced welfare benefits and deregulation of the labour market (Houeland, 2021). Trade unionists highlight how increased fuel prices as a result of fuel subsidies removed under the green agenda negatively impact the workers and the poor and deepen existing socio-economic inequalities and injustices (Houeland, 2021).
Houeland (2021) presents the realities and experiences of the workers and the poor in African countries — Zimbabwe, Sudan, Ghana, and Nigeria — who faced the negative impacts of fuel subsidy removal, which erupted in massive protests and labour resistance. These countries face numerous challenges such as poverty, unemployment and socio-political conflicts, and these conflicts have taken a violent turn in Sudan and Nigeria as they have not recovered from their economic crises since 2014 (Houeland, 2021).
Barca (2019) gives another relevant example of the working poor’s dependence on extractive industries for livelihood. She presents a raw testimonial of a Mapuche oil worker in Patagonia, where Argentina’s powerful oil industry destroyed local agriculture. Thousands, like himself, had no choice but to work in the extractive industries to sustain their livelihoods. Despite the health and safety hazards of working in the oil fields, he found himself better off than those farmers who were on the verge of starvation.
IV) The Potential for a Green (and Just) Transition in Developing Countries
The previous section illustrated the conflict between green economy preferences and their socio-political consequences, such as labour resistance and the absence of viable alternatives for livelihood. As a result, the ‘just transition’ emerged in the 1970s as a labour-oriented concept and was recognised internationally in 2015 by the Paris Agreement (Vona, 2016; LSE, 2024). It aims to ensure that ‘no one is left behind’ under the green agenda and consists of maximising job opportunities, inclusive growth, social justice and minimising risks of unemployment (World Bank, n.d; Gueye, 2022).
However, a just transition cannot happen automatically. Market-based mechanisms offer little to no fixes for the socio-economic spillovers from the green transition. In developing countries, unemployment is a major form of a large negative shock as a result of global climate policies (Vona, 2019). A just transition approach can include the effects on workers from energy transitions with a careful focus on the injustices in the Global South (Houeland, 2021). Hence, the green transition needs to be localised to address the vulnerabilities of workers to job losses and also offer opportunities to diversify economies (Lebdioui, 2024).
Lebdioui (2024) points to how green industrial policy (GIP) might offer the right tools for developing countries as the global economy expands, low-carbon solutions, replace fossil fuels with ‘clean’ energies and tackles unsustainable overconsumption. While GIP has been widely successful in China, Germany and the USA, what might a ‘just transition’ under the GIP look like for fossil-fuel-dependent developing countries? An industrial policy is selective government intervention through policy mechanisms that can alter the structure of sectors, balance regional growth and assist workers in retraining or relocating (Chang, 2011). It has the potential to address the concerns of the working poor who resist the green transition due to their vulnerability to such changes (Lebdioui, 2024).
In the globalised world, Naude (2011) pragmatises that the question is not whether developing countries should attempt to industrialise in the era of the climate crisis, but rather how countries should implement sustainable and just policy mechanisms that suit the specific needs of people.
A just and green economic transition could mean compensating for job losses in the fossil-fuel sector in selected countries through the reallocation and retention of fossil-fuel workers with a decent job (Lebdioui, 2024). In the context of fossil-fuel-dependent countries, potential policy tools for green transformations that incorporate a ‘just transition’ approach could be the inclusion of labour market policy and skills policy (Lebdioui, 2024; p.33).
Labour market policies can prevent misalignments and help workers adapt to redundancies in polluting industries, while skills policies ensure the acquisition of skills for localising green jobs. These policies overlap with industrial, energy, fiscal, and environmental policies (see Appendix 1). The optimal policy mix depends on each country’s context (Lebdioui, 2024; p.33).
Trade unionists in Africa argue that alternative energy and welfare benefits need to be in place before the reform, where all measures need to be democratically negotiated (Houeland, 2021). Gueye (2022) points to the usefulness and importance of ‘social consensus’, which entails participatory and collective decision-making about what a green and just transition in a developing country looks like. A good example of such a social dialogue is the tripartite agreement for the closure of Germany’s last coal mine, which included measures for the thousands of affected miners (Gueye, 2022).
V) Conclusion
Asking whether developing countries should industrialise while humanity is faced with an escalating climate crisis presumes that developing countries are in a position to choose a binary of industrialisation and deindustrialisation. Developing countries with extractive industries as a substantial source of employment and revenue face unequal consequences of the green transition, especially through the loss of livelihoods of workers who rely on brown jobs without viable alternatives.
This essay argues that developing countries are unevenly affected by the global green transitions through the destruction of their extractive industries, which serve as the main backbone for jobs, exports and revenue. A green industrial policy with labour market mechanisms could be a potential tool for policymakers to protect workers and ensure a ‘just transition’ towards climate-compatible industrialisation.
Reverting to the example of the Mapuche oil worker from section 3; for them, prosperity meant a flourishing and diversified agriculture without oil, based on the country’s rich natural resources instead of soil-eroding mono-crop plantations (Barca, 2019). Hence, in this case, sustainable agriculture development would allow the people to get back what’s theirs and serve as a form of a ‘just transition’. Therefore, a holistic mix of policies will look different for each country that addresses its people’s needs and enables a ‘just transition’ towards a sustainable and localised economic order.
References
Bandura, R., & Bonin, C. (2024). Is the Global Workforce Ready for the Energy Transition? Centre for Strategic and International Studies.
Barca (2019) The Labor(s) of Degrowth, Capitalism Nature Socialism, 30:2, 207–216, DOI: 10.1080/10455752.2017.1373300
Barker, T., Alexandri, E., Mercure, J.-F., Ogawa, Y., & Pollitt, H. (2016). GDP and employment effects of policies to close the 2020 emissions gap. Climate Policy, 16(4), 393–414.
Chang, H.-J. (2011). Industrial policy: Can we go beyond an unproductive confrontation? In Annual World Bank Conference on Development Economics. Washington, DC: World Bank, pp. 83–109.
Coady, David, Ian Parry, Nghia-Piotr Le, and Baoping Shang (2019). Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates. International Monetary Fund.
Gueye, M.K. (2022) ‘Climate action is about people, not just numbers’, SDG Action, 6 October. Available at: https://sdg-action.org/climate-action-is-about-people-not-just-numbers%EF%BF%BC/ (Accessed: 26 March 2025).
Hickel, J., & Kallis, G. (2020). Is green growth possible? New Political Economy, 25(4), 469–486.
Houeland, C. (2021) ‘Labour resistance against fossil fuel subsidies reform: neoliberal discourses and African realities’ in N. Räthzel, S. Dimitri and D. Uzzell (eds), The Palgrave Handbook on Labour and the Environment. Cham: Palgrave Macmillan
IEA (2023), Fossil fuel-related job losses and potential for inter-industry worker transfer in the Net Zero Scenario, 2022–2030, IEA, Paris https://www.iea.org/data-and-statistics/charts/fossil-fuel-related-job-losses-and-potential-for-inter-industry-worker-transfer-in-the-net-zero-scenario-2022-2030, Licence: CC BY 4.0
International Energy Agency — IEA. (2021).World Energy Outlook. Paris: IEA.
International Renewable Energy Agency (IRENA). (2022). Renewable Energy and Jobs: Annual Review 2022. Retrieved from https://www.irena.org/publications/2022/Sep/Renewable-Energy-and-Jobs-Annual-Review-2022
IRENA. (2021). Renewable Energy and Jobs– Annual Review 2020. Abu Dhabi: IRENA.
Lebdioui, A. (2024). Survival of the Greenest: Economic Transformation in a Climate-conscious World. Cambridge University Press.
Lema, R., Fu, X., & Rabellotti, R. (2020). Green windows of opportunity: Latecomer development in the age of transformation toward sustainability. Industrial and Corporate Change, 29(5), 1193–1209.
Lockwood, Matthew. (2015). Fossil Fuel Subsidy Reform, Rent Management and Political. New Political Economy 20: 475–494.
LSE (2024) What is the just transition and what does it mean for climate action? Available at: https://www.lse.ac.uk/granthaminstitute/explainers/what-is-the-just-transition-and-what-does-it-mean-for-climate-action/ (Accessed: 28 March 2025).
Naudé, W. (2011). Climate change and industrial policy. Sustainability, 3(7), pp.1003–1021.
Oppenheimer, M., Glavovic, B. C., Hinkel, J., et al. (2019). Sea level rise and implications for low-lying islands, coasts and communities. In IPCC Special Report on the Ocean and Cryosphere in a Changing Climate. Cambridge: Cambridge University Press, pp. 321–445.
Pegels, A., & Altenburg, T. (2020). Latecomer development in a ‘greening’ world: Introduction to the Special Issue. World Development, 135, 105084.
Perez, C. (2016). Capitalism, technology and a green global golden age: The role of history in helping to shape the future. In M. Jacobs & M. Mazzucato eds., Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth. London: Wiley Blackwell, Vol. 1, pp. 191–217.
Pollitt, H., Alexandri, E., Chewpreecha, H., & Klaassen, G. (2015). Macroeconomic analysis of the employment impacts of future EU climate policies. Climate Policy, 15(5), 604–625
Rodrik, D. (2014). ‘Green Industrial Policy’, Oxford Review of Economic Policy, 30(3):469–91.
Skovgaard, Jakob. 2018. International Push, Domestic Reform? Politics of Fossil Fuel Subsidies and their Reform, ed. Harro van Asselt and Jakob Skovgaard, 100–120. Cambridge: Cambridge University Press.
USGLC (2021) ‘Climate Change and the Developing World: A Disproportionate Impact’. Available at: https://www.usglc.org/blog/climate-change-and-the-developing-world-a-disproportionate-impact/ (Accessed: 25 March 2025).
Vona (2019). Job losses and political acceptability of climate policies: why the ‘job-killing’ argument is so persistent and how to overturn it, Climate Policy, 19:4, 524–532, DOI: 10.1080/14693062.2018.1532871
World Bank (n.d.) Just transition. Available at: https://www.worldbank.org/en/topic/extractiveindustries/justtransition (Accessed: 28 March 2025).
World Meteorological Organisation. (2021a). State of the Climate in Africa 2020. Geneva: WMO.
Appendix
Note. This essay was written as an assessed part of the ‘Political Economy of Development' module in the MSc Global Development course by SOAS, University of London (2024–25). This work is the author’s sole responsibility and should not be replicated without the author’s consent.
