The Isle of Wight is an unlikely setting for an industrial rebellion. It's true Karl Marx was once a regular visitor, but the island's a generally conservative place, better known for sailing than strikes. That changed on Monday, when workers occupied Britain's only major wind-turbine factory in protest at its imminent closure. Tonight they were still there, barricaded in the Newport plant's offices, surrounded by police and security guards, as hundreds of other workers and their supporters demonstrated outside.

Compared with British sit-ins of the past, or the mass confrontations over layoffs in South Korea this week – let alone the "bossnappings" and threats to blow up factory equipment that are now becoming common in France – the occupation at the plant in Newport might seem a tame affair. Only a couple of dozen workers are actually inside the factory premises, and after an initial appearance by the riot police, there has so far been no physical confrontation.

But the symbolism of the dispute could hardly be clearer. In the very week that the energy secretary Ed Miliband unveiled government plans for hundreds of thousands of new green jobs and a massive expansion of renewable energy, with wind power at its heart, production at the Vestas wind-turbine manufacturing plant ground to a halt. The profitable Danish owner is moving the work to Colorado and closing both its British factories with the loss of more than 600 green jobs – citing "lack of demand" and opposition to onshore wind farms in the UK – while ministers appear powerless to act.

You couldn't make it up and, not surprisingly, the workforce is demanding the government demonstrates its commitment to a green economy by taking over the plant and restarting production under new management. As a statement yesterday from the occupying workers had it: "If the government can spend billions bailing out the banks – and even nationalise them – then surely they can do the same at Vestas."

It's not as if attempts to save Vestas can be passed off as throwing money at "sunset" or lame-duck industries. The rapid expansion of low carbon industries is almost universally understood as indispensable to combating climate change and the economy of the future, with government plans to quadruple the number of wind turbines in the next decade effectively guaranteeing rapid market growth. As Caroline Lucas, Green party leader, who is backing the occupation, put it yesterday: "If ministers are serious about delivering what's been promised in the past seven days, why can't they offer loans or guarantees to Vestas to keep production going?"

This is the latest in a series of British and Irish workplace occupations since the economic crisis bit and jobs began to haemorrhage in their hundreds of thousands. At companies such as Waterford Crystal and the Ford car parts supplier Visteon, they have achieved significant results, saving jobs or winning better payoffs. At Vestas, the twin cause of jobs and climate change has created a common front between green activists and trade unionists, who have at other times found themselves at loggerheads over coal, nuclear power or the car industry.

But Vestas is a precarious protest with a political mountain to climb. The workers are defiantly proud of what they make. But it's a largely non-union plant with an anti-union management and a culture of bullying, according to staff. Inside the factory, Vestas miller and radiographer Mark Smith told me yesterday that managers threatened to bring charges and sack anyone who continued the sit-in – with the potential loss of several thousand pounds in redundancy money. Only two left. Earlier a private security firm sealed the doors to the occupied offices, cut the phone land lines, and blocked food and drink being sent in by supporters. Another occupying worker, Ian Terry, said they were expecting an eviction injunction, but would "resist without violence – we will stay until we're carried out".

There are a string of ways in which the government could keep the Isle of Wight plant in the wind turbine business, from the nationalisation demanded by the workforce to taking a stake on the back of new investment to levering in another company. As Len McCluskey, frontrunner to be elected leader of Britain's largest union Unite next year, argues: "Vestas is the clearest case for government intervention we could wish to see: 700 industrial jobs are being put at risk because of market failure in a sector the government is desperate to see expand. The workers are fighting for our economic and environmental future as well as their jobs." In Scotland, a small turbine Vestas spinoff company was saved from collapse earlier this year by a Scottish government-backed takeover.

Whitehall insiders say the Vestas management wasn't interested in cash support, blaming planning obstruction for the lack of a UK turbine market, and believe the government has already helped secure a Vestas offshore turbine R&D facility at the Isle of Wight site. Miliband, who announced greater control of planning and the dysfunctional privatised energy markets last week to drive green growth, insists: "We don't think the market on its own will deliver the low carbon jobs of the future we need."

Which is putting it mildly. If the closure of the Isle of Wight plant is confirmed, the green manufacturing jobs that ministers have enthused about will indeed be delivered – in Denmark and Germany. For all the brave government talk of a new industrial activism, results are so far thin on the ground. Now that a decade of reliance on the private sector has produced one of the lowest rates of renewable power generation in Europe, the need for direct public investment in a green industrial base – the commanding heights of the future – could not be more pressing.

But even as they inch in the right direction, ministers remain hobbled by New Labour's market-first inheritance. "We're in the hands of the company", as one puts it. That's exactly the problem. When it comes to the global threat of environmental crisis, more than any other issue, private firms cannot be in command. Three years ago, the Stern report described climate change as "the greatest market failure the world has ever seen". Its challenge will not be overcome by private enterprise or the market, or even "ethical" individual responsibility, but by collective public action.