Posted Nov 10, 2022, 6:30 a.m.Updated on Nov. 10, 2022, 3:21 p.m.
The climate revolution will not be a gala dinner. A note from France Strategy, published on Wednesday, sounds the alarm on the “worrying delay” in economic reflection around the massive consequences of the environmental transition on growth or inflation, recalling in particular the substantial amounts of public and private investments – 70 billion euros per year – necessary to move towards carbon neutrality.
This study – carried out by Jean Pisani-Ferry, professor at Sciences Po, and Selma Mahfouz, general inspector of finances, who had both participated in Emmanuel Macron’s 2017 campaign – stems from an order placed this summer by Elisabeth Borne. To anticipate the adaptation of the French economy to the climate imperative, the Prime Minister wanted to have clear ideas on “the assessment of the macroeconomic impacts of the ecological transition”, according to the words of the mission letter.
The “yellow vests” experience
A necessity in the eyes of the authors of the note: “For many, macroeconomists were slow to take up a subject which they perceived as essential for the long term, but rather secondary on the horizon of a few years”, write Jean Pisani-Ferry and Selma Mahfouz on behalf of France Strategy, a think tank attached to Matignon.
It is also recalled that “the simulations have often been framed in such a way as to produce favorable results, in order to convince decision-makers and opinions that climate action would induce economic and social benefits”.
The ace ! The picture looks much more complex and it would be a mistake to ignore it. “The experience of the carbon tax has taught us how risky it is to minimize the scale of the efforts that the transition will require”, recall the two authors. These promise to be massive, while decarbonization “mainly amounts to putting a price (explicit or implicit) on a resource (a stable climate) which was previously available at zero cost”.
This “basically amounts to a supply shock with, initially, negative consequences on consumption, labor productivity” and growth, it is written. Without forgetting the “greenflation” to come, since the transition seems destined to push up prices, by taxing carbon or by doing without cheap fossil fuels.
Massive short-term investment
The authors of the note, however, do not want to repaint their green scenario in black Soulages way. “Within ten or twenty years, building a climate-neutral economy is very likely easier than was believed until recently,” they write. Until then, this calls for a proactive public policy, which will be the subject of a more complete report in the spring of 2023. But the note published on Wednesday already sets out the toolbox that can be used, with three main instruments.
The first is to promote sobriety. The government has been trying since the start of the school year, forced by the war in Ukraine. It is also necessary to “redirect technical progress towards alternatives to fossil fuels” which requires reviewing research and development policies since “innovation is not spontaneously green” with the hope of having effects on the planet. horizon 2050. Finally, and this is probably the most important in the short term, we will have to invest massively to get out of fossil fuels.
Macron’s goals
On this last point, the bill promises to be steep. The note argues that the “additional investments (public and private) necessary to achieve the 2030 and 2050 climate objectives” could represent “an order of magnitude of 2.5 points of GDP in 2030”, or 70 billion. “The cost of the transition for public finances is likely to be substantial”, warns the note, while the State will also have to help the actors – households or companies – for whom the slope of the transition is too steep.
A realistic goal? During his last campaign, Emmanuel Macron promised 10 billion additional public investments for the climate transition over his five-year term, but no one in the government was able to say where the effort is currently at when presenting the budget for 2023.
The issues raised, each public actor will have to use the three levers described by the note. With already differences of approach. “The American strategy is mainly based on the decarbonization of the energy system and places a strong emphasis on research and innovation, without explicitly calling for behavioral changes in the direction of sobriety. This, on the other hand, is an integral part of European, British and French strategies,” the authors point out.