Abstract:  This article examines how fiscal constraints influence the development of contemporary industrial policy, with a focus on European initiatives to encourage green growth and sustainability. Due to high debt levels and the EU’s strict fiscal regime, governments are turning to off-balance-sheet financial instruments to enable investment without formally increasing public debt. Consequently, off-balance-sheet policies broaden the scope of fiscal capacity beyond the traditional realms of taxation and spending. I argue that the successful design of such policies requires intricate technical considerations and thus depends on the formation of “techno-political coalitions”: alliances combining technical expertise and political influence to clarify and navigate Europe’s fiscal and statistical rules. This article explores this phenomenon through the case study of energy performance contracts, creative instruments that facilitate the off-balance-sheet financing of building renovations. By bridging the gap between industrial policy scholarship and critical finance theory, the article demonstrates that contemporary industrial policy is not only concerned with directing public investment, but also with managing liabilities in ways that reshape fiscal capacity within the confines of strict fiscal constraints.

Keywords:  fiscal capacity; green industrial policy; off‐balance‐sheet policies; public debt

Published:   11 February 2026

Issue:   Vol 14 (2026): Doing Industrial Policy in a Geotech World: Challenges and Opportunities (In Progress)