This chapter explores the theoretical foundations of green industrial policy (GIP) with a focus on lithium extraction in Latin America. It begins by examining the resurgence of industrial policy debates, emphasizing the environmental dimension crucial for energy transition and climate change mitigation. Attention is given to how lithium, a key resource for batteries in green technologies, has pushed Latin American countries to pursue value-added processes in the mineral’s production. Building on the literature on developmental States, it argues that state–business relations play a critical role in shaping industrial policies and value chains. The chapter also addresses the socio-environmental implications of lithium extraction, underscoring the constraints that social conflicts can impose on state–business dynamics. Lastly, a typology of industrial policies is presented, arguing that selective and frontier policies, which target structural transformation and technological innovation, align most closely with the objectives of GIP. This framework sets the stage for subsequent empirical analysis of the lithium policies and their role in Latin American development.