For too long climate change has remained confined to the green silos of our public institutions: it was onyl the business of Environment Ministries. The situation seems to have improved over the last ten years, but we are still a long way from “climate mainstreaming”. For Benoit Leguet, Director of I4CE, 2020 will offer multiple opportunities to test commitments, in France and internationally.
In 2019, the French Finance Minister released the first environmental assessment of France’s budget and a Coalition of Finance Ministers for Climate Action was launched including now more than 50 countries. Other events have taken place that demonstrate the growing involvement of public actors long considered – or who have considered themselves – peripheral to the climate challenge: central banks and finance supervisors, public development banks or ministries of agriculture. The involvement of these actors, and in particular those in charge of financing the economy, is good news. Without them, it is illusory to implement coherent public policies.
But being involved is not enough: they must commit, act and deliver. And 2020 will offer many opportunities to test these commitments, in France, in Europe and internationally. Has the climate really become everyone’s business? We will see a little more clearly at the end of the year.
The greening of public budgets
2020 will first of all be a test year for the Coalition of Finance Ministers and its brand new Santiago Action Plan. In addition to sharing experience between countries, this Coalition will have to drive new commitments, for example on carbon pricing or on so-called “Green Budgeting”, i.e. aligning national budgets with the Paris Agreement. The European Union and its Ministers of Finance will also be expected to take action on these two issues: they are on the agenda of the new Commission’s Green Deal. And France will have an important role to play on Green Budgeting, as it will be hosting a meeting of the international Coalition on this topic at the beginning of the year.
The assessment of its own 2021 national budget, which should be made public next October, will be another test for France. And the Government and parliamentarians will have to show that they are drawing the political consequences from this exercise. Generally speaking, they will have to explain what is France’s climate strategy in terms of public finances. The same question will be asked at the local level this year: several local authorities have launched a climate assessment of their budgets in 2019, and it will be interesting to see how many others will join this movement in 2020.
A moment of truth for supervisors and financial institutions
2020 will also be a moment of truth for the public institutions that regulate finance. After a few years exploring the risks that climate change poses to the financial system, they are expected to turn a corner. In France, the central bank will assess the robustness of the system to climate risks by asking banks and insurance companies to carry out their first “climate stress test”. And internationally, the network of supervisors, the NGFS, will help its members to do the same by making public several reference scenarios that are essential to such exercises. Progress is also expected from the IMF on macro stress testing. On the climate reporting front, it is not only the European Union that is expected to act in 2020, but also France: it will update Article 173 of the 2015 Energy Transition Law. While this article has made France, in the eyes of the world, the pioneer of climate reporting, its concrete application unfortunately leaves much to be desired.
Other financial players will be tested in 2020: public development banks. Whether national, bilateral or multilateral, they have a major role to play in financing mitigation and adaptation to climate change, and must make the best use of their resources by seeking to have the most transformational impact possible. At the same time, they must stop funding projects that are in contradiction with the transition. Many of them have committed to “aligning” with the Paris Accord, and face both methodological and political challenges. Discussions are currently under way to organize a Summit of Development Banks before COP26, which could be an opportunity to reinforce this momentum and to put on the table a crucial issue: that of their mandate. Like the current debate on the European Investment Bank, climate protection should be an explicit part of the mandate set by governments. It is therefore not only the public banks that will be tested in 2020, but also – and above all – their shareholders.
Without mobilization of the agricultural and forestry sectors, there is no carbon neutrality.
In order to know whether the climate has really become everyone’s business, we will finally have to look in 2020 at what will happen in the agricultural and forestry sectors. It is now clear that they are at the heart and not on the periphery of the climate challenge. Without their mobilization there will be no carbon neutrality, neither in France nor elsewhere. The importance of climate change in the CAP reform, which should in theory be completed in 2020, and in the national strategic plans that European Ministries of Agriculture must submit to the EU by the end of the year, will be a test of the credibility of public authorities in this area. In France, another test will be the degree of mobilization around the This tool recently created by public authorities offers new funding opportunities to field actors who carry out climate projects. In 2020, low-carbon agricultural and forestry projects will have to be massively implemented.
Ensuring the coherence of public policies, breaking down institutional silos, mainstreaming climate… Behind these concepts and expressions lies the same idea, the same desire: to make climate an issue for those who do not say at first glance “it’s a subject for me”. I4CE has been accompanying them for years to facilitate awareness and action. 2020 will therefore be as much a test for these actors as it is for our Institute.
Benoît is the Managing Director of I4CE – Institute for Climate Economics, the think tank on the economics of the transition to a low-carbon and climate-resilient economy initiated by Caisse des Dépôts and Agence Française de Développement.
Benoît has been advising, since 2002, public and private decision-makers on the transition to a low-carbon and climate-resilient economy. He lectures on the economics of climate change in various Masters programs. He is also a member of several expert groups, inter alia: the French Climate Change Committee; the Kyoto Protocol’s Article 6 Supervisory Committee; the Advisory Board on Economic matters to the French Minister for Environment; the Goodplanet Foundation’s Scientific Committee.
Benoît is an engineering graduate of the Ecole Polytechnique and the ENSTA Paris Tech, and holds a Master’s degree in Environmental Economics from Paris-X University.