Building Regional Net Zero Economies: What Global Experience Tells Us About Place-Based Industrial Policy

The Net Zero Economy Authority has published new research by Urbis examining how international place-based industrial and innovation policy approaches can support regional economic transition, industry development and investment decision-making. The research finds that place-based approaches can help regions manage the uneven impacts and opportunities of the net zero transition, but their effectiveness depends on interventions being tailored to each region’s assets, capabilities and constraints. The research identified several consistent themes across international case studies, highlighting the conditions most likely to support successful regional economic transformation.

Regional competitive advantage is a central anchor for effective place-based policy. Successful approaches build from existing or emerging strengths, which can include renewable energy and critical minerals, industrial land, ports, infrastructure, established industries and supply chains, skilled workforces, universities and research institutions. Regional specialisation is critical, with stronger approaches identifying where regions have distinct advantages and connect complementary capabilities through broader industry ecosystems and supply chains.

Governments can use a broad range of mechanisms to create investable markets and reduce risk, such as:

• Direct grants are a common funding mechanism, particularly for early-stage investment, enabling infrastructure and foundational industry capability.

• Co-funding, concessional finance, tax incentives and public investment can help mobilise private capital. Shared testing, demonstration and commercialisation infrastructure can bridge the gap between research and market deployment.

• Procurement, offtake arrangements and other demand mechanisms can provide greater confidence for investment in emerging industries.

There is no single funding model that works everywhere. Effective approaches match the funding mechanism to industry maturity, market readiness and regional circumstances.

Major capital investment alone rarely delivers enduring regional transition outcomes. The research finds that infrastructure needs to be aligned with land-use planning, skills and workforce development, innovation support, finance, housing and community investment. Importantly, these systems also need to be sequenced. Energy, transport, water, land, housing, skills, public services and approvals need to be planned so that constraints are addressed before they prevent private investment from scaling.

Governance and delivery capability are critical to translating policy ambition into regional outcomes. More effective approaches have clear mandates, capable lead institutions and durable governance arrangements, with the ability to coordinate across portfolios, jurisdictions, industry and regions. Government’s role can shift over time from setting direction and funding enabling infrastructure to coordinating delivery, supporting markets, addressing bottlenecks and maintaining investment confidence.

Durable First Nations economic participation depends on how governance, ownership, capital and delivery responsibilities are structured. The case studies show the importance of Indigenous governance and place-based delivery, public risk-sharing, access to capital, and workforce and capability development alongside investment. First Nations participation is an institutional design consideration, rather than something that can be added to existing policy frameworks through engagement alone.

A multidisciplinary Urbis team delivered the research, with contribution support from 15 Times Better and Common Capital.

Australia’s dispersed geography and regional population distribution amplify infrastructure, coordination and delivery challenges. This makes regional specialisation, connectivity, multi-level governance, and cross-regional collaboration particularly important. International experience points to a clear overarching insight: successful regional economic transformation requires the alignment of governance, investment, infrastructure, workforce, and market-shaping levers to the unique conditions of each region, supported by sustained coordination over time.

Read the full report here