The Business of the State - Businesses of the State and Climate Action - Introduction

Jul 19, 2026

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Governments can drive climate progress by underwriting investments, coordinating actors for decarbonization, and ensuring equitable distribution of green-transition costs and benefits. State support may include direct R&D funding, but interventions should be weighed against policy menus that avoid deterring private investment. Many businesses of the state (BOSs) operate in protected or advantaged markets, potentially slowing private climate action while climate finance to developing countries still needs major scaling. New World Bank BOS data highlights substantial state footprints in high-emitting and climate-vulnerable sectors, with implications for adaptation and mitigation capacity.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages28

Reading Time1 h 11 min

Introduction

State Presence in High-Emitting Sectors and in Sectors Vulnerable to Climate Change

BOSs in Potentially High-Emitting Sectors

Scale-Up Needs for Climate Adaptation and Mitigation

Regulatory Reforms to Enable Private Investment

Public Disc losure Authorized 5. Businesses of the State and Climate Action Pub lic Disc losure Authorized Introduction Governments have comparative advantages in underwriting investments to advance the climate agenda, coordinating multiple actors around the common goal of decarbonization, and ensuring that the costs and benefits of a green transition are distributed equitably across society so that economic growth and poverty are tackled alongside environmental crises. The state can also choose to provide direct support for research and development (R&D) to create and scale up new low-carbon technologies, instead of providing tax incentives or imposing regulations. Any state intervention should be considered in the context of a menu of policy options that can achieve the same objective more efficiently and without deterring private investment. For example, restrictive regulations in these markets can slow the green transition by inhibiting private investment, innovation, and technology adoption. The presence of many businesses of the state (BOSs)—often operating in protected markets with nonfinancial mandates or benefiting from explicit or implicit advantages—can deter the private sector from engaging in climate action. Yet climate finance flows to developing countries should increase by a factor of 4–8 times (World Bank 2022a), in particular from private sector sources towards low-and lower-middle income countries where current private mobilization rates are low (OECD 2022) . For these reasons, it is essential to identify the state’s footprint through BOSs in high-emitting sectors and in sectors vulnerable to climate change and to design reforms to scale up climate action. It is also critical to understand how market regulations and market structures can influence and potentially deter both private investment in climate action and the mobilization of private climate finance. ■ The new World Bank Global Businesses of the State (BOS) database unveils the extensive presence of the state across many potentially high-emitting sectors as well as sectors that are vulnerable to climate change. Current estimates focused on traditionally defined state-owned enterprises (SOEs) in fossil fuel–dominated economies show that SOEs are responsible for one-sixth of global greenhouse gas emissions, mostly driven by SOE emissions in the energy sector (Benoit 2019a, 2019b; Benoit et al. 2022). This share is likely an underestimate: the presence of BOSs in other high-emitting sectors (such as manufacturing, cement, and steel) has not been captured consistently largely because of a lack of data. The share of BOSs in sectors that are at risk of experiencing the negative effects of climate change is also large, underscoring the vulnerability of these BOSs, the sectors in which they operate, and the importance of investing in their resilience, especially in infrastructure and network industries. ■ The need to scale up finance for climate adaptation and mitigation is growing, particularly in credit-constrained low- and middle-income countries. Most BOSs in these sectors are less creditworthy than their sector’s revenue leaders and use state resources to boost their credit rating. So, when BOSs are present in sectors that call for large investments in climate action, their low profitability and creditworthiness impair their ability to engage in climate adaptation and mitigation. Such firms also add to governments’ financial burden when state guarantees notch up their creditworthiness. For these reasons, more efforts are needed to incentivize private capital to invest in adaptation and mitigation. ■ Regulatory reforms are needed to encourage more private investment and to scale up climate action. BOSs in competitive markets are the least justified. They often operate in protected markets or benefit from explicit and implicit advantages, deterring the green transition. This chapter provides a deep dive into the cement industry, a hard-t

FAQs

Why can governments support climate action through Businesses of the State (BOSs)?

Governments can underwrite investments, coordinate actors toward decarbonization, and fund R&D to create and scale low-carbon technologies. The chapter also stresses the need for interventions that distribute costs and benefits equitably.

What does the World Bank BOS database reveal about state footprints?

The database shows that BOSs are present not only in power generation but also across other high-emitting sectors. It indicates that a sizable share of BOS firms operate in sectors potentially responsible for greenhouse gas emissions beyond the power sector.

How can BOSs hinder private investment in climate action?

BOSs often operate in protected markets or receive explicit and implicit advantages, which can deter private-sector engagement. Restrictive or uneven market conditions can slow green transition by inhibiting investment, innovation, and technology adoption.

Jul 19, 2026

Upload by Himbo