Op-ed | A public finance programming law for the climate

In this op-ed published in a French economic newspaper, Benoît Leguet, director of I4CE, considers that the French Government must plan over the long term the necessary financing for climate change mitigation and adaptation, by instituting a public finance programming law for climate. France has set itself climate objectives, it must clarify what means it will devote to them.

Public finances: investing more on the climate but spending efficiently

By 2021, the French Government will have made an unprecedented budgetary commitment to the climate of approximately 30 billion euros. In addition to the regular national budget, the climate component of the French Recovery Plan, which is financed by the European Union, will be added. These additional efforts are only intended to last two years, whist the need is expected to continue to increase beyond this timeline. The CO2 problem cannot be solved with current technology however the France 2030 investment plan could help contribute to the financing of some of these new innovations.

Beyond these new innovations, it is also vital to mobilise and increase additional public funding which supports households, businesses and local authorities in the implementation of low-carbon alternatives. In France, there is a vast amount of work to be done and all these projects will require a share of public money: renovation of public buildings; social housing; private housing; tertiary buildings; deployment of public transport; investments in railways; investments to improve energy efficiency in industry; transformation of agricultural systems. Although doing `whatever it takes’ is essential, it results in public money becoming a scarce resource. It is clear that more public money will need to be spent on the climate after 2022 (ie end of the French covid recovery plan). Therefore, it is vital that the way that this money is spent improves and that every euro spent on the transition has an impact.

A law to ensure resources are made available over the long term

The French State must continue this effort over the long term and set up a public finance programming law for the climate, following the example of what is done in other strategic areas and subjects that require constancy. Several French programming laws currently provide budgetary appropriations over multiple years: the Military Programming Law, passed in 1997, which runs from 2019 to 2025; the Justice Programming Law passed in 2019 that runs from 2018 to 2022; the Research Programming Law that runs from 2020 to 2030.

By establishing a similar instrument on climate change mitigation and adaptation, public authorities would be obligated to match environmental ambitions with resources. Today the long-term budgetary implications of France’s climate and energy commitments are formally assessed but not debated. As if it were a separate subject, the presentation of the finance bill does not include an assessment of the compatibility of the financial resources with the environmental objectives. Admittedly, the environmental assessment annexed to the finance bill makes it possible to determine what is favourable or unfavourable to the climate within the bill, however the assessment does not verify the coherence of the objectives and the means.

A public finance programming law for the climate would allow long-term perspectives. Even though the French State sets itself long-term objectives, it seems to be completely short-sighted about how to accomplish them. An observer looking at the evolution of the terms and conditions specified in decrees, in particular window spending (aid for the acquisition of vehicles, energy renovation etc), might conclude – certainly too quickly – that the French State is sailing at a loss.

A public finance programming law does not have any normative value for the programmatic part of credits and uses, since only finance laws – voted annually by French Parliament – can set these authorisations. In practice however, it appears to protect the budget in the areas concerned. The draft Finance Law for the year in fact includes the elements of the programming laws and the areas concerned seem – for the most part – to be protected from saving measures during the execution of the budget.

Steering the means of climate policy by strengthening the role of Parliament

The power of French Parliament could potentially be strengthened by a programming law. Parliament could accept the law presented by the French government and increase its means with much greater ease than with a regular finance bill, where parliamentarians have very little room to manoeuvre to make amendments to appropriations. Having a debate in the Chamber to find out if enough resources are being put into achieving given climate objectives within the next ten years would allow for an open and honest discussion.

Furthermore, this programming exercise could be linked, in Parliament, with the examination of multiannual energy programming, which since the Energy-Climate Law will be the prerogative of Parliament for the next period. There will also be the examination of the reports of the French Climate High Council, which is responsible for assessing the compatibility of commitments with the climate trajectory. In order to assess the progress of climate action and make necessary adjustments, it is becoming increasingly necessary to convene a major parliamentary meeting. Discussing the financial means at the same time would strengthen and enhance the credibility of this exercise.

Involving economic stakeholders and reducing costs: a question for the presidential candidates

Finally, a programming law such as this would facilitate the transition by aligning the climate expectations of the various players. Additionally, the data is presented in a format that is easier to integrate into a business plan, thus reducing uncertainty for economic players and risk-taking and in turn, significantly reducing the high cost of necessary climate action.

Candidate programs for the 2022 French presidential elections must include a Climate Strategy covering public finance for the next five years, laying out the contours of their climate budgets. It is essential that this strategy be included in a public finance programming law for the climate at the start of the five-year term.