Editing IPCC:AR6/WGIII/Chapter-4 (section)

==== 4.4.1.7 Example: Structural Change Provides a Way to Keep Jobs and Mitigate ====

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Developing countries have experienced a period of rapid economic growth in the past two decades. Patterns of growth have differed markedly across regions, with newly emerging East Asian economies building on transition to manufacturing – as China has done in the past – while Latin American countries tend to transition directly from primary sector to services ( [[#Rodrik--2016|Rodrik 2016]] ), and African countries tend to rely on productivity improvements in the primary sectors ( [[#Diao--2019|Diao et al. 2019]] ). Yet many countries still face the challenge of getting out of the ‘middle-income trap’ ( [[#Agénor,%C2%A0P.-R.R.%20and%C2%A0O.%20Canuto--2015|Agénor and Canuto 2015]] ), as labour-saving technological change and globalisation have limited options to develop via the manufacturing sector ( [[#Altenburg,%C2%A0T.%20and%C2%A0D.%20Rodrik--2017|Altenburg and Rodrik 2017]] ).

Looking ahead, several studies have illustrated how structural change towards sustainability could lead to reduced emissions intensity and higher mitigative capacity. In China, for example, the shift away from heavy industry (to light industry and services) has already been identified as the most important force limiting emissions growth ( [[#Guan--2018|Guan et al. 2018]] ), and as a major factor for future emissions ( [[#Kwok--2018|Kwok et al. 2018]] ).

Overall, Altenburg et al. (2017) argue that reallocation of capital and labour from low- to high-productivity sectors – in other words, structural change – remains a necessity, and that it is possible to combine it with reduced environmental footprint (including, but not limited to, mitigation). They argue that this dual challenge calls for structural transformation policies different from those implemented in the past, most importantly through a ‘systematic steering of investment behaviour in a socially agreed direction’ and encompassing policy coordination ( ''limited evidence'' , ''med'' ''ium agreement'' ).

In order to permit progress on their SDG agendas, it is essential that countries develop visions of their future decarbonised sectoral production structure, including its ability to generate growth in incomes, employment and foreign exchange earnings. as well as the related spatial distribution of production, employment, and housing. To this extent, governance and institutional capacity matter, such as availability of tools to support long-term planning. A sectoral structure that permits strong growth is essential given strong associations between growth in per-capita incomes and progress on most SDGs (including those related to poverty; health; education; and access to water, sanitation, electricity, and roads; but not income equality), in part due to the fact that higher incomes provide both households and governments with resources that at least in part would be used to promote SDGs ( [[#Gable--2015|Gable et al. 2015]] ).

The future viability of sectors will depend on the extent to which they can remain profitable while relying on lower-carbon energy. The challenge to identify alternative sectors of growth is particularly acute for countries that today depend on oil and natural gas for most of their foreign exchange and government revenues ( [[#Mirzoev--2020|Mirzoev et al. 2020]] ). Changes in economic structure will also have gender implications since the roles of men and women vary across sectors. For example, in many developing countries, sectors in which women play a relatively important role, including agriculture and unpaid household services like collection of water and fuel wood, may be negatively affected by climate change (Roy 2018). It may thus be important to take complementary actions to address the gender implications of changes in economic structure.

Given strong complementarities between policies discussed above, an integrated policy approach is crucial. For example, as suggested, the actions that influence the pace at which GHG emissions can be cut with political support may depend on taxation (including carbon taxes), investments in infrastructure, spending on R&amp;D, changes in income distribution (influenced by transfers), and communication. In this light, it is important to consider the demands that alternative policy packages put on government policy-making efficiency and credibility as well as the roles of other enabling conditions. In fact, plans to undertake major reforms may provide governments with impetus to accelerate the enhancement of their capacities as part of the preparations ( [[#Karapin--2016|Karapin 2016]] ; Withana 2016; [[#Jakob--2019|Jakob et al. 2019]] ).

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