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La transition net‑zéro, c’est-à-dire la transformation vers une économie neutre en carbone et résiliente, est un défi majeur et urgent pour réduire les effets du changement climatique. Cette transformation nécessite la transition et l’adaptation de toutes les activités et de tous les agents économiques. Elle relève d’abord de la sphère économique réelle et doit s’appuyer sur une feuille de route opérationnelle des actions à mener. Celle-ci doit être définie par une politique économique ambitieuse (budgétaire, fiscale, monétaire, réglementation des produits et des secteurs, etc.).

After several years of strong growth, the revenue generated by carbon pricing mechanisms (carbon taxes or markets) worldwide, as reported in our 2023 edition of the Global Carbon Accounts, stabilized at nearly USD 100 billion. This stabilization could not be more deceptive.  The future has rarely been so uncertain for carbon prices, caught between very strong opposing trends, and the next two years could mark a major turning point, for good or bad, for the use of these climate policy instruments worldwide. 

What are the carbon taxes and markets around the world, the range of carbon prices, the revenues generated, the emissions covered by these mechanisms? Find the answers to these questions, and many more, in the new edition of the Global Carbon Accounts from I4CE.

Investment in the development of the cleantech sector in Europe is too slow and unevenly spread across EU member states and despite its best intentions, it is not clear that the EU’s Net-Zero Industry Act (NZIA) will rectify this. Unveiling the Net-Zero Industry Act (NZIA) earlier this year, Ursula Von Der Leyen declared it would “create the best conditions for those sectors that are crucial for us to reach net-zero by 2050: technologies like wind turbines, heat pumps, solar panels, renewable hydrogen as well as CO2 storage.”

Year after year, France becomes aware of the drastic deterioration in the carbon sink of its forests. Tree mortality increases sharply with droughts and health crises. Yet France needs this carbon sink to achieve its climate objectives and needs to preserve it by improving the resilience of its forests, but also - and this is less obvious - by making the best possible use of the harvested wood from the forests. France's climate strategy is counting heavily on maximising the carbon sink in wood products, i.e. making greater use of the wood harvested to manufacture long-lasting products, particularly in the construction industry. Some products store carbon over the long term, and are not only those that we imagine at first glance, as we showed in a previous study. 

Achieving carbon neutrality will require the redirection of harvested wood towards long-life uses. To achieve carbon neutrality, France is relying on its carbon sink to balance residual emissions in 2050. A smaller carbon sink would require even greater emissions reductions from other sectors (transport, agriculture, industry, etc.), sectors in which France is already calling for drastic sixfold cuts between 1990 and 2050. In a context where the carbon sink in ecosystems is already falling sharply due to an increase in tree mortality, preserving this sink and developing carbon storage in wood products must be a major concern of the national climate policy.

Climate action is a rich stew with many ingredients. From transport to agriculture, construction to forestry, every part supports the whole. The stew would be incomplete without one crucial but rare addition: public investment. Chefs d’état in Paris and Brussels are currently scratching their heads on how best to add this ingredient to the pot. Two hurdles face them: how to invest enough, and how to guarantee that investment over the long term.  In this newsletter, we have translated some of I4CE's analysis to better understand what's going on in the French kitchen, complemented with a dash of a European cleantech investment plan.

The EU’s Strategic Technologies for Europe Platform (STEP) is an important boost towards unlocking future cleantech public finance. In this blog, Ciarán Humphreys argues that Member States should get behind a European solution.

Psychologists sometimes talk about the five stages of grief: denial, anger, bargaining, depression, and acceptance. One year on from the announcement of the US Inflation Reduction Act (IRA), the European response has looked startlingly similar. Public anger in Brussels at perceived American protectionism. Private sector depression at the prospect of Europe falling behind in the global cleantech race. Denial of the gap between the EU and US efforts, by arguing that that all EU and national spending on cleantech amounts to a conservative estimate of what the IRA offers (while not factoring in the full range of US support). 

The European Union (EU) Innovation Fund is Europe’s largest fund for climate innovation. It has a keyrole to play in European climate action, energy security and technological leadership. To unleash the full potential of European cleantech, greater public support is needed to help more companies and projects cross the so-called “valleys of death” that are inherent to cleantech innovation and scale-up. In this endeavour, relying solely on national public funds would create two risks. In countries where governments do not rise to the financing challenge, innovators will fail or flee. Conversely, governments with the fiscal means to spend big on cleantech may create a harmful subsidy race among EU member states, undermining EU solidarity and the integrity of the EU Single Market.

We are coming to the end of this Commission's mandate, time to think about the future of EU climate action. France and Germany called for a EU Green industrial policy last year but since then they have not yet show EU leadership. An EU policy needs to get 3 design elements right: Vision, Funding and Governance. In this OpEd, Stiftung KlimaWirtschaft and I4CE call for France and Germany to come together in leadership and, ahead of the EU elections, call for a European response to the great challenge of the 21st century.

Twelve EU Member States have started implementing new budgetary processes to help align their public budgets with climate objectives. Green budget tagging, a prominent tool, can provide a clear picture of the share of a national budget that is aligned, or runs counter, with the national climate strategy. France publishes its annual green budget every year and now, for the first time in 2023, the government intends to use its data for the preparation of the draft budget law.

Faced with international competition exacerbated by the US Inflation Reduction Act, Team Europe (and longtime team member, France) is preparing its response. The team’s tactics tackle two challenges: greening existing industrial sectors such as steel or cement, and industrialising the production of green goods, particularly those cleantechs that will make the transition a reality, such as heat pumps or electrolysers. To meet the first challenge, the French government has put 5 to 10 billion euros of public money on the table to decarbonise the most polluting production sites, in return for private investment. But has the extent of the industrial investment needs been properly assessed?

As the world enters a new era of cleantech competition, policymakers must confront two key policy questions - regulation and investment. The Net Zero Industry Act is Europe’s response to the former. Yet key concerns around permitting, sectoral targets and the scope of the Act will need to be addressed if it is to be effective, argue Thomas Pellerin-Carlin and Ciarán Humphreys in this blog post.

Elections of the European Parliament are coming up in June 2024 and will be followed by the renewal of the Commission. Hence, there are only a few months left to finalize the implementation of the renewed sustainable finance strategy adopted in 2021. This strategy aims, among other things, to increase the contribution of the financial sector to sustainability. It seems too early to already draw conclusions on how the Commission delivered on its objectives as some key legislative and supervisory processes are still under way. This newsletter focusses on some of these ongoing processes that receive quite some attention in the public debate

Since their introduction, climate stress tests have taken a lot of space in the public debate. Put in the spotlight by supervisors and the NGFS, their primary objective is to encourage banks to integrate climate-related risks into their activities and to carry out an initial assessment of the banks' capacity to deal with these risks.

Negotiations are under way on the Corporate Sustainability Due Diligence Directive, commonly known as the "CSDDD". Regarding climate, an obligation of climate transition plan for companies is discussed. But let’s keep careful on this point. Europe is in the process of developing climate transition plan requirements in two other directives on corporate sustainability reporting (CSRD) and on prudential requirements for banks (CRD). We must therefore ensure that the discussions result in a final version of the CSDDD that is consistent with these other texts and at the same time complementary.

This week, for the International Day of Forests, I4CE offers you an overview of the forestry issues that are being debated in France and in Brussels. In our newsletter, you will discover a new blog post by Julia Grimault on European carbon certification and our latest analyses on the adaptation of French forests to climate change, the French carbon sink and the wood industry. 

The European Union still has a lot of work to do. Yesterday the European Commission published its Net Zero Industry Act, a piece of its response to the American Inflation Reduction Act, a necessary but still insufficient building block to keep the European Union in global cleantech race. It will also have to complete a number of directives and regulations to deliver its Green Deal. The EU election in 2024 is fast approaching, time is of the essence. 

The adoption by the US of the Inflation Reduction Act gave new life to the global cleantech race. The EU must now learn three lessons from it, writes Thomas Pellerin-Carlin, the EU Programme director at the Institute for Climate Economics – I4CE. As anyone who has marvelled at professional cyclists vying for position knows, the decisions competitors take challenges the strategy of those following close behind. Since August 2022, when the US Congress adopted a public climate investment plan of $400-800 billion as part of the Inflation Reduction Act (IRA), it’s safe to say the global cleantech race has moved up a gear.