This article is part of a Synergies series on Next generation trade arrangements for environment and sustainable development. Any views and opinions expressed are those of the author(s).

-----

Climate change is increasingly a polycrisis: an environmental challenge unfolding simultaneously through energy insecurity, industrial competition, technological concentration, trade fragmentation, and persistent inequalities in development. Industrial policy designed primarily to maximize domestic production is poorly equipped for a transition in which these problems are increasingly interconnected across borders.

This requires a different conception of green industrial policy. The objective cannot simply be to bring manufacturing home. It must be to build capabilities across economies while keeping technologies affordable, supply chains resilient, and markets sufficiently open for new producers to enter. That means treating industrial policy and international cooperation as complements rather than opposites: domestic support can create firms and capabilities, but international finance, technology partnerships, access to intermediate inputs, common standards, and dependable export markets determine whether those capabilities can deepen and survive.

India illustrates why. Its experience across solar, wind, and green hydrogen shows that deployment, manufacturing, technological learning, and demand creation are distinct stages of industrial development. Building capacity at one stage does not guarantee progress to the next. The policy challenge is therefore no longer simply how governments can subsidize green industries, but how domestic industrial policy can be embedded within international arrangements that allow capabilities to circulate, deepen, and spread.

The green transition needs a new model of industrial policy because the problem it is trying to solve has changed. In a polycrisis, national industrial capacity matters, but national self-sufficiency is neither realistic nor sufficient. The task is to build an international political economy of decarbonization in which resilience comes from wider productive capacity, rather than from every country attempting to produce everything at home.

The Case of Solar

India is a useful test of this new industrial policy problem precisely because it has already achieved something difficult: extraordinary deployment at scale. Installed solar capacity rose from 2.82 GW in March 2014 to 150.26 GW by March 2026, while total renewable capacity reached 274.68 GW. India now ranks third globally in installed renewable energy capacity. The transition has therefore created something industrial policy needs: a large and expanding domestic market.

But scale has not eliminated dependence. It has changed its form. India’s solar module manufacturing capacity reached roughly 172 GW by March 2026, compared with just 2.3 GW in 2014. The government has reinforced that expansion through its ₹240 billion (≈ $26 billion) Production Linked Incentive programme for high-efficiency solar PV manufacturing. Yet the rapid growth of downstream capacity has not been matched evenly across the value chain. India only introduced its first Approved List of Models and Manufacturers for solar cells in July 2025 and has subsequently tightened requirements governing the use of domestically approved cells. The deeper upstream stages of the chain remain considerably less developed.

This is not simply a story about import dependence. It exposes a more fundamental problem for green industrial policy. Manufacturing a final product, mastering the technologies embodied within it, developing competitive suppliers, and innovating at the technological frontier are different capabilities. Industrial policy that counts factories or gigawatts of announced capacity can therefore mistake production scale for industrial depth.

The policy response cannot simply be to close the remaining supply chain. New producers are entering industries whose existing networks have been built over decades and whose costs depend on international specialization. Restricting access to imported cells, wafers, machinery, or other intermediate inputs too quickly can increase the costs faced by the very manufacturers governments are trying to develop. The challenge is therefore dynamic: governments need to protect the process of learning without protecting every stage of production indefinitely.

The Case of Wind

India’s experience with wind points towards another route. By March 2026, the country had around 24 GW of annual wind turbine manufacturing capacity. The significance of that capacity is not merely that turbines are produced domestically, but that Indian manufacturing has become connected to international markets. The International Energy Agency (IEA) now identifies India as one of the emerging economies capable of playing a larger role in global wind supply chains. Its modelling suggests that producing turbines in Europe while sourcing components from India could reduce three-quarters of the production-cost gap between European and Chinese turbines.

That possibility captures what a less zero-sum green industrial policy could look like. Europe does not need to manufacture every component domestically to strengthen its supply chain resilience, and India does not need to reproduce an entire global industry within its borders to acquire more valuable industrial capabilities. Specialization across an internationally distributed production system can simultaneously diversify supply, create markets for emerging producers, and preserve some of the cost advantages generated by trade.

The Case of Hydrogen

India’s emerging green hydrogen economy exposes a different constraint. Here the problem is not primarily whether firms can manufacture, but whether someone will buy what they produce. Under the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme, the Solar Energy Corporation of India (SECI) has awarded 412,000 tonnes a year of green hydrogen production capacity in its first tranche and another 450,000 tonnes in the second. Its green ammonia procurement programme has also tendered 724,000 tonnes of annual supply across 13 fertilizer plants.

These interventions matter because they create something subsidies to production cannot provide on their own: demand. A firm will not develop a new technology simply because a government helps finance a factory if there is no credible market for its output. India is therefore experimenting with several different functions of green industrial policy at once: creating scale through deployment, encouraging domestic production, attempting to deepen supply chains, and constructing markets for technologies that are not yet commercially mature.

Taken together, solar, wind, and hydrogen reveal why the old distinction between industrial policy and trade policy is increasingly unhelpful. The same transition can require domestic support in one part of a value chain, imported inputs in another, foreign technology and research partnerships elsewhere, and international customers at the end of it. The relevant question is no longer whether an economy should be open or protected. It is which capabilities should be built domestically, which should be accessed internationally, and how countries can move between the two as their industries develop.

India consequently offers more than a case of successful renewable energy expansion. It shows why industrial policy in a climate polycrisis has to become relational. No country controls all the finance, technologies, minerals, manufacturing capabilities, and markets required for decarbonization. Building domestic capability therefore increasingly depends on constructing productive relationships beyond the domestic economy. Europe offers a particularly important test of whether such a bargain can work.

The relationship between India and Europe already extends well beyond conventional climate assistance. Germany’s KfW reported in 2023 that its financing under the Indo-German solar partnership had reached approximately €1 billion since 2017. In October 2025, the European Investment Bank committed up to US$60 million to the India Energy Transition Fund, which is targeting US$300 million for investments spanning renewable energy, transmission, electric mobility, energy efficiency, and the circular economy.

But finance alone does not create industrial capability. The more significant development is that EU-India cooperation is beginning to connect trade, research, standards, technology, and industrial production.

The third phase of the EU–India Clean Energy and Climate Partnership, running from 2026 to 2028, covers renewable hydrogen, offshore and nearshore wind, electricity markets and smart grids, energy efficiency and energy diplomacy. At their January 2026 summit, the two sides also created a Task Force on Green Hydrogen and agreed to convene an EU–India Wind Business Summit.

The EU-India Trade and Technology Council is pushing this relationship further into industrial cooperation. At its July 2026 meeting, the EU and India agreed to establish an innovation hub for EV charging technologies and testing, launch a start-up partnership focused on deep-tech clean technologies, strengthen cooperation on clean energy value chains, and begin formal negotiations on India’s association with Horizon Europe. A €15.2 million jointly funded programme on EV battery recycling goes further still: it includes advanced recycling and material recovery technologies and envisages a joint pilot line in India for industrial scale validation.

This matters because it begins to connect the different stages of capability formation that conventional climate partnerships often separate. Finance can support investment; joint research can generate knowledge; testing facilities can help firms prove technologies; common standards can reduce barriers to market entry; pilot manufacturing can translate research into production; and trade access can give successful firms markets large enough to scale.

The recently concluded EU–India Free Trade Agreement negotiations create an opportunity to connect these instruments more deliberately. Bilateral trade in goods was already €120 billion in 2024. Under the negotiated agreement, India and the EU would liberalize the overwhelming majority of bilateral goods trade once the agreement is signed, ratified, and enters into force. The importance of that agreement to the green transition should therefore be understood as more than tariff reduction. It can become part of an industrial bargain linking market access to capability formation.

That would require moving beyond a model in which Europe finances India's deployment while India buys European technology. Joint engineering programmes could target specific supply chain bottlenecks. Shared testing and certification infrastructure could allow Indian producers to demonstrate compliance with European requirements before entering the market. Research partnerships could be tied more closely to commercialization and manufacturing. Long-term procurement arrangements could give emerging green hydrogen and low-carbon-material producers greater certainty that overseas demand will exist when projects begin operating.

Europe would gain from such an arrangement too. Its problem is not simply decarbonization, but how to decarbonize while managing energy security, industrial competitiveness, and concentrated clean technology supply chains. Strategic production partnerships with India could add suppliers without requiring Europe to recreate every stage of every value chain domestically. The IEA's analysis of wind manufacturing illustrates the potential economic logic: international specialization can diversify supply at considerably lower cost than complete reshoring.

That is why the EU–India relationship matters beyond the two economies. It offers a possible model of industrial policy organized through interdependence rather than against it. India brings scale, engineering capabilities, an expanding manufacturing base, and one of the world's largest future clean energy markets. Europe brings capital, research capacity, advanced technologies, standards, and a large external market. Neither side needs the other simply to reproduce what it already possesses.

The opportunity is to identify the points at which those different capabilities can be combined.

If that happens, North-South climate cooperation begins to look different. Technology transfer is no longer principally about supplying equipment. Market access is no longer principally about cutting tariffs. Development finance is no longer principally about funding deployment. Each becomes part of a process through which firms in emerging economies can learn, specialize, meet international standards, and eventually compete without permanent protection.

That is the deeper bargain the green transition now requires: not the abandonment of national industrial policy, but its internationalization.

----------

Simran Keshwani is founder and research lead at IndiaForth, a Sydney-based advisory firm focused on India’s rise and its global implications.

-----

Synergies is an online platform featuring expert commentary and opinions curated by TESS. We foster dialogue and incubate ideas on how to shape a global trading system that effectively addresses global environmental crises and advances sustainable development. Synergies draws on perspectives from leading experts and practitioners across policy communities from around the world. We seek to cultivate solutions-oriented policy analysis for a sustainable future.

The Executive Editor is Fabrice Lehmann.

Disclaimer

Any views and opinions expressed in Synergies are those of the author(s) and do not necessarily reflect those of TESS or any of its partner organizations or funders.

License

All of the content on Synergies is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) license. This means you are welcome to adapt, copy, and share it on your platforms with attribution to the source and author(s), but not for commercial purposes. You must also share it under the same CC BY-NC-SA 4.0 license.

If you would like to reuse any material published here or if you have any other question related to Synergies, send an email.