Effective industrial policies to transform industries facing negative externalities

This paper provides a brief overview of the associated costs of negative externalities in the EU. It highlights which sectors should be politically prioritized to foster industry transformation and reduce external costs. Industrial policies in the form of command-and-control and market-based policies are compared to conclude which form of industrial policy is most beneficial to reduce negative externalities. Lessons are drawn from various industrial policy examples from the EU and the US. The EU should foster market-based policies to disincentivize harmful production and consumption. Revenues obtained should be re-invested into industry transformation to accelerate economic growth and reduce external costs.