Publications

This week, I4CE launches the first European Climate Investment Deficit report. During a year’s research, we analysed investments in 22 sectors of the EU27 economy that are critical for the EU to deliver its 2030 climate and energy security objectives. The European Green Deal is gaining economic momentum, as climate investments in the EU grew 9% in 2022, reaching […]

I4CE's Landscape of Climate Finance is an overview of climate investments made by households, companies and public authorities. Such investments include retrofitting buildings, purchasing electric vehicles, installing renewable energy, as well as paying for rail, cycling and urban public transport infrastructure.

Emmanuel Macron certainly made a mistake in calling for a European “regulatory pause” on the environment. In the same speech, he however expressed a truth that is essential to the debate: “Europe and France risk being the best-in-class in terms of regulation, and the worst-in-class in terms of financing”. It went unnoticed but, as highlighted in this I4CE newsletter, the time has come for a debate on how the EU can better finance the climate transition. And there is no time like the present! In precisely one year, on June 9th 2024, hundreds of millions of Europeans will vote for a new European Parliament, that will in term elect a new European Commission that will negotiate the future EU budget.

How much should France invest in climate action ? Experts from diverse backgrounds have sought to answer this important and seemingly simple question. They agree that France needs to invest more to reduce its greenhouse gas emissions. But they differ on the scale of public and private funding needs, which range from €20 to €100 billion a year. Is this a cause for concern? Not really, because the experts are not counting the same thing. These differences can be explained and should not be used as an excuse for inaction.

How does the government plan to finance the increase in its public spending on climate action? Further to the government’s reactions to the Pisani-Ferry report, which proposes using all options, including debt and tax increases, let us make an assumption: what if the government were to rely solely on budget saving options? I4CE's Damien Demailly reviews the savings options available to the government. Clearly, they are all difficult to implement and some may prove counterproductive. They are nevertheless on the government’s agenda and are worth explaining and discussing, as are all options to finance the transition.

Local authorities have a major role to play in achieving France’s 2050 carbon neutrality objectives, as set out in the National Low-Carbon Strategy (Stratégie Nationale Bas Carbone, SNBC). Due to their assets and areas of expertise, local authorities must make numerous climate investments, implement strategies and action plans, and take measures to encourage stakeholders within their territories. This study aims to estimate the cost of such climate action for local authorities. 

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?

Industry: relocation and decarbonisation at the heart of the debate. The recent succession of crises (health, energy, geopolitical) and increased international competition have prompted France to look for ways to strengthen its industrial and energy sovereignty. It faces this challenge in addition to the challenge of decarbonising its industry. In this context, France and Europe are developing industrial policies with two objectives – relocation and decarbonisation – and with new tools such as the France 2030 plan and the Net Zero Industry Act at the European level. These policies target both ‘historical’ industries, such as steel and cement, and new clean technologies, from solar to batteries.

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.

The “abatement cost” has emerged as a key tool to steer the decarbonisation of the economy, to reduce its cost, and to assess the efficiency of a technology, an investment or a public policy. This tool nevertheless has numerous limitations, and must therefore be used with caution. Find out more in this I4CE interview with Stéphane Hallegatte, Senior Climate Change Advisor at the World Bank, who has published several academic articles on this subject.

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.

For years, the European Union assumed it would lead the cleantech race because it was the only one running in it. Mistakenly so. With the Inflation Reduction Act, the US quickly catches up. This brief argues that the best EU policy answer to the IRA is an EU long‑term climate investment plan. As the political appetite for such a plan is currently limited, the European Commission should use the political momentum to propose a targeted investment plan that focuses on the development, scale-up, manufacturing and deployment of clean technologies in the EU. It identifies three first bricks that can already be laid out to build this plan.

2022, France is paying dearly for a dependence on fossil fuels maintained by a chronic lack of investment in the decarbonisation of the economy. This edition of the Landscape of climate finance in France makes a detailed analysis of these critical expenditures by households, companies and public authorities, in the retrofitting of buildings, the purchase of electric vehicles, and renewable energies, as well as in rail, cycling and urban public transport infrastructures. Encouragingly, climate investments have increased significantly in the past year, driven, among other factors, by favourable regulations and by state support under the recovery plan. But this growth remains fragile, and analysis of several transition scenarios shows that climate investments need to increase further in order to stay on track to carbon neutrality and to ensure a lasting reduction in France’s dependence on fossil fuels.

As COP27 draws to a close, let us remember the obvious: implementing the Paris Agreement will require financial flows from developed to developing countries. However, these flows are not just the much discussed $100 billion a year promised by the nations of the North to their counterparts in the South - a promise that has not been kept to date. And they are not just about budgetary flows either. More fundamentally, the architecture of development financing - or at least its climate component - needs to be reviewed in depth. It is therefore primarily the mission and modus operandi of the multilateral banks, and more broadly of the public development banks, that must be reviewed.

In 2022, the G20 raised a key question: are development banks well equipped to deliver their mandate and lead the way to a more sustainable development, in a world faced by multiple crises? Multilateral development banks (MDBs) and development financial institutions (DFIs) business model was historically developed around project financing. But they now need to shift to supporting the transition of their counterparts: country governments, ministries, financial regulators but also national public banks, local financial institutions and companies. A new journey for development banks, and a new journey for their counterparts. Quite a challenge.

Over 35°C in exam halls during the French baccalaureate, inhabitants affected by their residences overheated… Summer 2022 has once again shown that our buildings aren’t adapted for the new heat waves. And yet every year, tens of billions of euros are invested in construction and renovation projects that don’t always take climate change into account. In this study, I4CE proposes immediate actions on three levers to initiate the process of adapting our buildings, and three more structural changes, including changes to thermal regulations.  

L’adaptation de la forêt française aux changements climatique devient un enjeu politique important. D’une part parce que, de sécheresses en incendies, les conséquences de l’évolution du climat sur les peuplements sont de plus en plus visibles. D’autres part parce que son adaptation est une condition indispensable pour que la forêt joue le rôle central que l’on attend d’elle dans l’atténuation du changement climatique.

The industrial sector currently accounts for around 20% of French greenhouse gas (GHG) emissions.

This I4CE report focuses on the role of countries’ Long-Term Strategies (LTSs) in the Paris alignment approaches of Development Finance Institutions (DFIs). It explores the possible roles of both the LTS development process and the resulting LTS document in providing insights on the Paris alignment of investments within investment decision-making processes. The findings are relevant for a broader range of financial institutions.

A steep rise in investment in low-carbon vehicles and sustained climate investment in other sectors, a fall in the financing of fossil fuels, a climate funding deficit of over 13 billion that recovery measures are unlikely to offset...