The escalating geopolitical tensions in the Middle East, specifically the ongoing US-Israeli war with Iran, are not simply a regional crisis. They represent a fundamental shift in the global energy landscape, triggering significant oil price volatility and forcing a re-evaluation of economic resilience strategies. This isn’t a temporary spike; it’s a harbinger of a modern reality where energy shocks are more frequent and severe, demanding a proactive and comprehensive response. The core of that response, argues economist Mariana Mazzucato, lies in a bold green industrial strategy.
The conflict has already had a demonstrable impact on global markets. As The Guardian reported in March 2026, Iran’s control over the Strait of Hormuz – a critical chokepoint for global oil and gas shipments – has been leveraged to disrupt supply, exacerbating price increases. This disruption isn’t just affecting fuel costs; it’s rippling through supply chains, increasing government borrowing, and creating uncertainty in stock markets worldwide. The question isn’t *if* another such shock will occur, but *when*.
Beyond Fossil Fuel Dependence: A Call for Strategic Investment
Mazzucato’s argument, detailed in her recent work, centers on the need to move beyond simply diversifying energy *sources* and focus on fundamentally reshaping *how*, *where*, and *by whom* things are produced. Traditional approaches to energy security have often focused on securing access to fossil fuels, a strategy that inherently ties economic stability to geopolitical instability. A green industrial strategy, in contrast, aims to build a more resilient and sustainable economy by fostering innovation and domestic production in renewable energy technologies.
This isn’t about simply subsidizing existing green technologies. Mazzucato advocates for a “mission-oriented” approach, where governments actively direct investment towards specific, ambitious goals – such as achieving carbon neutrality or developing a fully circular economy. This requires not just funding research and development, but also actively shaping markets, creating demand for green products, and supporting the growth of new industries. The concept builds on the historical success of mission-oriented policies like the US’s Apollo program, which spurred massive technological advancements.
The Role of Government in Driving Innovation
A key tenet of Mazzucato’s argument is that the government has a crucial role to play in driving innovation, rather than simply relying on the private sector. She challenges the conventional wisdom that government intervention stifles innovation, arguing that the state has historically been a key driver of technological progress. This includes not only direct funding of research, but also using public procurement to create demand for new technologies and fostering collaboration between universities, businesses, and government agencies.
For example, government investment in renewable energy infrastructure – such as wind farms and solar power plants – can create a stable market for these technologies, attracting private investment and driving down costs. Similarly, government policies that incentivize energy efficiency – such as building codes and appliance standards – can reduce energy demand and lower carbon emissions. The Inflation Reduction Act in the United States, signed into law in 2022, represents a significant step in this direction, providing substantial tax credits and incentives for clean energy investments. The White House’s Environmental Justice website provides details on the act’s implementation and impact.
Building Resilience Through Regionalization and Diversification
The current energy crisis also highlights the importance of regionalizing supply chains and diversifying production. Over-reliance on a single source of energy or a single geographic region makes economies vulnerable to disruptions. A green industrial strategy can help to address this vulnerability by promoting the development of local and regional renewable energy industries. This not only reduces dependence on foreign energy sources but also creates jobs and economic opportunities within local communities.
This regionalization extends beyond energy production. Manufacturing of critical components for renewable energy technologies – such as solar panels, wind turbines, and batteries – should also be diversified and brought closer to home. This reduces reliance on potentially unstable supply chains and ensures that countries have access to the technologies they need to transition to a green economy. The European Union is actively pursuing this strategy through its “Green Deal Industrial Plan,” aiming to boost the competitiveness of European clean tech industries.
Addressing the Social Costs of Transition
A successful green industrial strategy must also address the social costs of the transition. The shift away from fossil fuels will inevitably lead to job losses in some industries. It’s crucial to provide support for workers in these industries, including retraining programs and income support, to ensure a just and equitable transition. The benefits of the green economy must be shared broadly, ensuring that all communities have access to affordable clean energy and economic opportunities.
This requires proactive policies to address potential inequalities. For instance, investments in renewable energy projects should prioritize communities that have historically been burdened by pollution and environmental injustice. Similarly, job training programs should be targeted towards workers from disadvantaged backgrounds.
The current energy shock serves as a stark reminder of the interconnectedness of the global economy and the vulnerability of economies that are heavily reliant on fossil fuels. Mariana Mazzucato’s call for a green industrial strategy offers a compelling vision for building a more resilient, sustainable, and equitable future. The next key development to watch will be the implementation of the EU’s Green Deal Industrial Plan and the ongoing assessment of the US Inflation Reduction Act’s impact on clean energy investment, expected in early 2027.
What are your thoughts on the role of government in driving the green transition? Share your perspectives in the comments below.
