Let's cut the cost of future crises now
The climate emergency is here and now. The consequences of climate change seemed remote to many and the summer of 2022 will perhaps be remembered as the summer of the end of carelessness. The end of carelessness about the consequences of climate change and the costs that go with it: in France, farmers' unions are already asking for 2 to 4 billion euros to compensate for their losses. An end to the insouciance, too, on our dependence on imported fossil fuels. We were not ready and are still not ready to suffer the consequences of the war in Ukraine. We are managing the emergency by spending tens of billions of euros of public money.
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We need structural responses to prepare for the next crises, because they are bound to come. Adapting our forests, buildings and infrastructures to a changing climate, efficient renovation of buildings to save more energy, charging stations for alternative vehicles... These are all structural projects that must be urgently revived, and which the future climate and energy programming law must address.
These transformations will require new investments from everyone, especially the State, local authorities and public financial institutions. US President Biden has promulgated a $370 billion climate investment plan, and German Chancellor Scholz has planned to devote 200 billion euros to this by 2026. Is France ready to make such commitments? For the moment, a few announcements have been made, such as the creation of a 1.5 billion euro fund to help local authorities. We will have further details during the autumn budget debate, when France will present its budgetary trajectory for the five-year period in the framework of the public finance programming law.
To help the government and all stakeholders build their climate budget trajectory, I4CE has continued over the past twelve months to quantify the investments needed and to make proposals for financing the transition. You will find them in our 2022 annual report, which traces the main impacts of I4CE over the past year on all the major themes covered by the Institute, and which I invite you to reread in order to get to know us better and to learn about the political agendas to be followed in the autumn.
Enjoy discovering our activities!
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Foreword from Jean Pisani-Ferry, Chair of I4CE
Pushing the boundaries of expertise
The new I4CE activity report illustrates once again that the Institute has found its place and added value as a producer of expertise on climate. Its data and analyses are increasingly contributing to the development of public policies and to the quality of public debate. The Institute's entire team can be proud of its work.
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For a year, I4CE met with the main candidates' teams and invited them to workshops to help them prepare their climate programmes. We alerted them to the need to anticipate the public funding they would need to support the French, and asked them to unveil their "climate budget". Many of them did the exercise, as our dedicated website to the presidential election and our deciphering of the programmes show. They proposed very different budgets and the winner of the election, Emmanuel Macron, pledged to invest 50 billion over the five-year period for the ecological transition and to develop third-party financing solutions for the energy renovation of housing and electric vehicles.
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The European objective of carbon neutrality aims to balance greenhouse gas emissions and their absorption by "carbon sinks". It thus gives a decisive role to agriculture and forestry, which can capture carbon from the atmosphere and store it in the soil and biomass. But how can we encourage farmers and foresters to adopt practices that store more carbon, such as agroforestry? By paying them for this stored carbon. This is what the European Commission is planning.
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In order to become carbon neutral, France will have to significantly increase carbon storage in the soil and biomass of its forests and fields. This objective is in conflict with another objective: to harvest more and more wood to feed the bioeconomy. France intends to reconcile the two by following a scenario set out in its National Low Carbon Strategy (SNBC). Thanks in particular to the work of I4CE, experts now agree that the assumptions of the SNBC will have to be revised. Just one example: the production of wooden frames or wood-based insulation - all these "long-lasting" products are supposed to be multiplied by 10!
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Through the Common Agricultural Policy or collective catering, the French public authorities spend more than 25 billion euros each year to finance our agricultural and food system. This is the type of information that I4CE has made public to help you better understand how this system is financed: the various public supports, the role of banks and consumer purchases. The problem is that this funding is not geared towards transforming our food. It tends to preserve the status quo.
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In recent months, I4CE has continuously assessed the effectiveness of public policies, starting with subsidies and loans granted to households to help them renovate their homes. Do they allow the French to carry out quality renovations, which lead to drastic reductions in their energy consumption? No, unfortunately not. The government intends to encourage such renovations, but our evaluation shows that too many households, especially the most modest, are not able to bear the remaining costs of such extensive work. We have also evaluated the bonus-malus scheme for the acquisition of vehicles, and have concluded that its scale is not consistent with the sector's decarbonisation objectives. These are two examples, among others, which show that it is necessary to better evaluate public policies.
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I4CE has developed and contributed to the development of tools such as the "Landscape of climate finance" or the "Green Budget" to help the French State and local authorities plan the financing of the transition. These tools show how it is financed today and help to debate its financing tomorrow, based on a shared assessment and figures. Because these tools have proven their usefulness in France, I4CE participates in their international dissemination and helps actors in other countries to adapt them to their national context, while learning from their experiences.
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After having long been the left-behind of action against climate change, adaptation is finally becoming an issue for public decision-makers. Faced with the costly consequences of heat waves and droughts, they are obliged to act. Many of the presidential candidates have made proposals - admittedly insufficient - to adapt France. And it is to be hoped that the French Prime Minister's coordination of "ecological planning" will make it easier for all the ministries concerned to take charge of adaptation. There are many of them.
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In the new French government, the French Ministry of Ecology has been split in two, with the creation of a Ministry of Ecological Transition and Territorial Cohesion. This new Ministry embodies a political that was the subject of a consensus during the presidential election: to territorialise the transition, to involve local authorities more. They are already in the front line to invest in public transport, charging infrastructures for electric or hydrogen vehicles or in the renovation of public buildings. And they will have to continue to invest, and even more, to provide concrete support to households and local businesses.
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Banking supervisors and other financial regulators became concerned about climate change when they realised that climate poses risks to financial stability. Whether these risks are due to the impacts of climate change or to the decarbonisation of the economy. They have therefore encouraged financial institutions to take these "climate risks" into account in their traditional risk management processes. This is easier said than done: the analysis of these risks remains partial and not very operational for changing portfolios, as the work of I4CE has shown, and there are still many improvements to be made.
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After committing to "align with the Paris Agreement", public development banks have invented new practices, new indicators and have tried to disseminate them in their respective organisations. The challenge of alignment has not yet been met, yet new challenges have already emerged. For example, they need to ensure that all the infrastructure they finance is adapted to a climate that is already changing, and more generally to strengthen their action in favour of adaptation. And in all the countries in which they operate, if they are to be effective, they will have to help governments prioritise the investments they need and develop "long-term climate strategies".
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