2023 agenda: there has never been a better time to act
2022 was an eventful year in terms of climate. The year saw the emergence of a new concept, that of the polycrisis: war in Ukraine, the aftereffects of Covid, the return of inflation, the gas crisis, agricultural shortages, persistent droughts and other dramatic climatic events… all of these crises have ultimately pointed to our direct or indirect dependence on fossil fuels; our weaknesses when faced with a changing climate; and the vulnerability of our economies and the middle and lower classes.
With these crises, the temptation to put the fight against climate change on the back burner was therefore great. And governments, in Europe and in the world, have in fact largely favoured short-term consumer subsidies over investments for the transition. In this context, one question deserves to be asked: after the time of the fire brigade, will architects still have enough to invest tomorrow, for both mitigation and adaptation? The answer obviously depends on the national context and the priorities of the moment. In Germany, the invasion of Ukraine has opened up the public moneybox, including for investment in renewable energies. In France, after the announced end of the “whatever it takes”, there has been a delay in implementing the transition financing plan outlined by Emmanuel Macron during the presidential campaign. In the face of a climate change that has been predicted by scientists for more than thirty years, we must plan the investments essential to transforming France into a green nation.
The year 2022 has been punctuated by remarkable advances. But for each of these advances, much remains to be done in 2023.
At the international level, COP27 in Sharm el-Sheikh has led to an agreement on the issue of loss and damage. But in 2023, beyond the negotiations under the UN, the key will be the reform of the international financial architecture and its impact on the ability of development banks to tackle climate change. The contribution of development banks to financing the transition in developing countries could be much more decisive than their size would suggest.
In 2022, the European Union has agreed on the major components of the Green Deal: priority to renewable energies, now presumed to be of higher public interest; a ban on the sale of new combustion engine cars from 2035; reform of the carbon market; introduction of a carbon tax at the borders; a ban on the import of products that promote deforestation; progress on climate reporting by companies and their transition plans… In 2023, this regulatory framework will have to be complemented by progress on energy efficiency. And by a “European investment and financing plan”, which is essential to accompany economic transformations and respond to the U.S. Inflation Reduction Act and its $350 billion investment plan for the low-carbon transition and clean technologies. There will be no shortage of opportunities on the European agenda.
Finally, in France, the newly created General Secretariat for Ecological Planning, which reports to the Prime Minister, is now coordinating the development of the energy and climate strategy. It will also ensure that the commitments made by all ministries in the area of climate are properly implemented. But to facilitate this proper implementation, the Government should have a multi-year financing plan by 2023 that complies with its commitments to carbon neutrality, which also takes into account the need to adapt to climate change.
The I4CE team will engage in 2023 on all these issues. We remain driven by two convictions. First conviction: strong and structured public action (let’s call it “planning”) will be necessary for the transition; and such public action is all the more legitimate and relevant in a context of multiple crises, because it reduces the uncertainties for companies, households and local authorities that will implement the transition. Second conviction: crises can accelerate awareness and action in favour of the transition. And therefore make possible for public action what “yesterday” seemed impossible to implement, and even to discuss.
There has never been a better time to act: we look forward to seeing you throughout 2023, to contribute to these different agendas in France, in Europe, and internationally.
International public finance
The international debate on climate finance will be marked in 2023 by the reform of the international architecture, in the forefront of which are the World Bank and the IMF. There was a consensus at the last COP on the fact that the international system is not “fit for purpose” and that in-depth reforms will have to be initiated from 2023. With the French President’s Summit for a New Financial Pact, the Spring Meetings and the Finance in Common Summit, there will be many opportunities to increase and improve the effectiveness of international public financing. For this funding to be used to best effect, developing countries will need to continue to develop long-term transformation plans and strategies to finance them.
Financing the Green Deal
The European Union has had a decision-laden 2022. Much of the regulatory pillar of the Green Deal has been adopted. In the face of Vladimir Putin’s second invasion of Ukraine, the European Union chose to accelerate the deployment of renewable energy and strengthen its energy efficiency efforts – but also new investments in fossil gas. As European regulation and the extension of the carbon price create new investment needs, how does the Union wish to finance its transition? While the US has made a huge leap forward with the Inflation Reduction Act, the EU has not yet responded to this challenge. It will have many opportunities in 2023 to do so with the on the Stability and Growth Pact, the mid-term review of its multiannual budget and the preparation of the European elections and the renewal of the Commission in 2024.
In recent years, whether it be with the taxonomy on green activities or the reinforcement of mandatory reporting for companies and financial players, the EU has worked hard to mobilise private finance for the transition and has positioned itself as the world leader in financial regulation for the climate. 2023 will be the occasion to move to the next stage: the Banking Package currently under discussion at the European Parliament should make climate transition plans mandatory for banks, and the European Banking Authority should define the precise modalities.
Financing the transition
In France, the beginning of the five-year term was marked by the extension of the tariff shield, which will cost tens of billions of euros this year. Which financial resources will the State and local authorities have at their disposal to invest in the transition and help households and businesses to do the same? In 2023, the Office of the Prime minister and its newly created General Secretariat for Ecological Planning will have to complete their work on the financing of the transition, in order to feed the debates around the Energy and Climate Programming Law, the 2024 budget or the budget allocated to transport infrastructures.
Adaptation to climate change
With the summer that it has gone through, France has become aware of an imperative: to adapt to a changing climate. After the first measures taken in the context of the budget debate, there will be opportunities to make sure that the awareness is translated into action and funding with the Energy and Climate Programming Law, the 2024 budget and the revision of the national adaptation plan. In 2023, all public funding should also pass an “adaptation stress test”, so that the government stops spending 50 billion each year on infrastructures that we do not know whether they are adapted to tomorrow’s climate.
Local authorities investments
Uncertainty. This is the most appropriate word to describe the situation in which French local authorities find themselves. It is difficult to say whether they will have the capacity to increase their investments in the energy transition to start catching up, as they have to deal with inflation and rising energy prices. 2023 will be both a test of how well they have managed to deal with this shock, and a test of the new scheme launched by the Government to support the transition of local authorities: the Green Fund. The Fund has been allocated 2 billion in 2023, and the sustainability of this funding is so far… uncertain.
Agriculture and carbon certification
On agriculture, the year 2023 will be marked in France by a new orientation law designed to meet the challenge of the retirement of a large number of farmers. It will have to both attract new farmers and help them adopt practices and invest in more sustainable farms in the face of climate change. To do this, the law will have to take a serious look at public aid for investment, and not forget the farmers who are retiring and whose farms are losing value due to climate change. At the European level, 2023 will be a key year for the carbon certification of agricultural practices, the first essential building block for reforming the EU’s agricultural policy.
Forest adaptation and wood industry transformation
The French forest was severely tested in 2022, if only by the summer forest fires. While considerable resources have been allocated to forest renewal, the challenge this year will be to ensure that they are used to adapt forests, to make them more resilient to climate change. This is easier said than done. It will also be necessary to ensure that these resources contribute to the development of the most climate-relevant wood processing industries, foremost among which is the production of wood-based materials, which have a great advantage: they store carbon for many years.