FOREWORD
Pushing the boundaries of expertise
This success does, however, raise expectations. The context today is no longer the same as it was when the Institute was created. To help us prepare for the next stage, twelve actors and observers of public life gathered under the chairmanship of Alain Quinet have reflected on the future of I4CE in a benevolent but demanding manner. Their recommendations, of course formulated in complete independence, were invaluable (see 2022-2026 Devepment plan below). They have allowed us to step back from the day-to-day imperatives and to look ahead to the next few years in order to draw up a new development plan.
The challenge for I4CE will be to continue to push back the boundaries of expertise. Our role is not to repeat what is already known, but to explore new fields and innovate. Public action is faced with new challenges, starting with the indispensable adaptation to the consequences of global warming. The summer of 2022 in France unfortunately shows us once again that we are not ready, and we are paying the price. I4CE must broaden the range of its areas of excellence, but it must also know how to abandon the areas in which it has been a reference. This is its genetic code.
The institute must also push back its geographical boundaries. France accounts for less than 1% of global emissions, and if some people brandish this figure to slow down the French transition, it should rather encourage us to act more and more on an international scale. To help the European Union meet the challenges of the transition, I4CE will therefore, from this autumn, develop its European activities. The Institute has acquired expertise that can be useful to many countries, and will thus be enriched by foreign experiences that will be rich in lessons for the French debate.
These ambitions will require resources. They will require changes in our governance. In this regard, we have initiated a discussion with our major partners, who share our objectives and have always trusted us.
Jean Pisani Ferry, Chair of I4CE
Let's cut the cost of future crises now
We need structural responses to prepare for the next crises, because they are bound to come. Adapting our forests, buildings and infrastructures to a changing climate, efficient renovation of buildings to save more energy, charging stations for alternative vehicles... These are all structural projects that must be urgently revived, and which the future climate and energy programming law must address.
These transformations will require new investments from everyone, especially the State, local authorities and public financial institutions. US President Biden has promulgated a $370 billion climate investment plan, and German Chancellor Scholz has planned to devote 200 billion euros to this by 2026. Is France ready to make such commitments? For the moment, a few announcements have been made, such as the creation of a 1.5 billion euro fund to help local authorities. We will have further details during the autumn budget debate, when France will present its budgetary trajectory for the five-year period in the framework of the public finance programming law.
To help the government and all stakeholders build their climate budget trajectory, I4CE has continued over the past twelve months to quantify the investments needed and to make proposals for financing the transition. You will find them in our 2022 annual report, which traces the main impacts of I4CE over the past year on all the major themes covered by the Institute, and which I invite you to reread in order to get to know us better and to learn about the political agendas to be followed in the autumn.
Enjoy discovering our activities!
Benoît Leguet, Directeur d’I4CE
#Mission
The Institute for Climate Economics is an expert association in economics and finance whose mission is to support action on climate change. Through its applied research, the Institute contributes to the climate policy debate. It also publicly publishes analyses to support the work of financial institutions, governments and local authorities.
IMPACTS
PRESIDENTIAL 2022
Candidates unveil their climate budgets
They proposed very different budgets and the winner of the election, Emmanuel Macron, pledged to invest 50 billion over the five-year period for the ecological transition and to develop third-party financing solutions for the energy renovation of housing and electric vehicles. The subsequent legislative elections have reshuffled the political deck. To find out what will become of the President's commitments and to know France's climate budgetary trajectory, we will have to carefully observe the budgetary debates in the autumn of 2022 and the financing plan associated with the energy-climate programming law.
#I4CE_Report
Landscape of climate finance in France – 2021 edition
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… These are some of the facts provided in the 2021 Landscape, in which I4CE also calls on public authorities to prepare for the end of the recovery plan.
#Consensus
French Presidential election: consensus for the new five-year term.
For the past year, I4CE has been meeting with the teams of the main presidential candidates to encourage them to prepare their climate programmes in order to achieve the French objectives.
Benoit LEGUET
Managing Director I4CE
#Website
Today, the State and public authorities are actively involved in climate-friendly investments. What will happen in the future? Who will pay, who will go into debt: the State, local authorities, taxpayers, households, companies or future generations? We have asked the French candidates to answer this question, to prepare their “climate budget”. It is a question of transparency and credibility. It is also a way to test the coherence of their climate strategy. So, are the candidates ready? The I4CE team deciphered the programs of the six main candidates.
CARBON CERTIFICATION
Agriculture and forestry: let's not miss out on European carbon certification
While the question of who will pay remains open - a question that deserves a fundamental debate - the Commission is already working on a carbon certification system whose objective, as its name indicates, is to certify that the practices that will ultimately be remunerated are really positive for the climate and, more generally, the environment. Certification poses many technical and political problems, which I4CE has already faced when, with many partners, we helped France to create and adopt the Label Bas-Carbone. To help the EU think faster, to overcome these problems, I4CE intends to help it draw on the experiences of Member states, to learn from their successes... and from their failures.
#I4CE_Report
Recommendations for the European carbon certification framework
To achieve the climate goals of the UE, The European Commission wants to create a carbon certification framework to encourage carbon storage in the land sector. The challenge is to develop a common and harmonised framework at the European level by better relying on the expertise acquired through existing certification frameworks. With this study, I4CE propose 7 recommendations, inspired by both our concrete experience with the French Label Bas-Carbone to which we have contributed, and by 15 years of research on carbon certification.
#Press
EURACTIV
Payment for carbon farming: Towards an ambitious and pragmatic certification scheme
The European Commission will propose a ‘carbon certification’ by the end of the year as a first step towards remunerating farmers and foresters who contribute to carbon farming. This certification project raises debates and concerns. For Adeline FAVREL of I4CE, the EU can respond and develop an ambitious certification by relying on the experience of the Member States in this field.
#I4CE_Report
Design principles of a Carbon Farming Scheme
Climate change is only one of the challenges facing agriculture. In this joint Policy Brief, IDDRI and I4CE identify several conditions for the European agricultural carbon offsetting and carbon certification scheme to support the objectives of the EU’s “Farm2Fork” strategy and the EU’s biodiversity strategy.
#2minOn
2 minutes on #CarbonFarming
CARBON SINK
Carbon sinks: let's not make unrealistic expectations
However, increasing the production and consumption of 'long-life' products is more than relevant: it is necessary whether we increase the wood harvest a little, a lot or not at all. How can the production capacity of these sectors be increased? What are the economic and regulatory incentives to expand their outlets on the French market? I4CE seeks to answer all these questions so that the future SNBC can initiate a proactive policy to support the sectors we need most.
#I4CE_Report
Carbon sinks: is France’s ambition realistic?
The National Low-Carbon Strategy plans to double the carbon sink thanks to the contributions of forests, agriculture and CO2 capture and geological storage technologies. To clarify the conditions for this massive increase in the sink, I4CE has deciphered these contributions and the underlying technical assumptions, and compared them with the existing literature. The results show that the expected transformations are profound and that certain orientations of the forestry and wood sector may not be feasible.
#I4CE_Report
Reorienting the uses of wood to improve the carbon sink: which products to focus on?
I4CE has reviewed long-life wood products, the technical constraints on their production, and possible outlets on the French market. It emerged that, in the short term, the panel and insulation sector is the most promising. In the longer term, the better-quality wood processing industries could make better use of their resources. I4CE proposes initial avenues for developing these sectors.
FOOD
New data on the financing of our food
The reorientation of public funding is a long-term task and I4CE will pursue this objective with a particular focus on the most difficult sectors: livestock. As for the reorientation of consumer funding, it raises the question of policies to encourage the food industry and consumers to produce and consume more sustainably. I4CE has already contributed to the French debate on the food voucher. The good news is that this device is not, far from it, the only solution to ensure that the food transition does not leave anyone by the wayside. I4CE continues to explore all the options available.
#I4CE_Report
Assessing the sustainability of the french food system: methodological issues and results
To learn more about the methodology used by I4CE to assess the contribution of financing flows to the emergence of a sustainable food system, this technical paper introduces it and identifies its limitations and key methodological challenges for the future.
In ‘Décryptage des financements du système alimentaire français et de leur contribution aux enjeux de durabilité’ (2021) I4CE has drawn up an initial estimate of the number of financial flows that cross the food system and their contribution to sustainability. The resulting conclusion is that activating the financial lever has two components: financing investments that transform the means of production in the long term and securing the income of sustainable production methods so that they are economically viable.
#I4CE_Report
Does a more sustainable diet increase consumers’ budgets?
Level of food waste reduction, substitution between animal and vegetable proteins, share of sustainable products, price of these products, consumer income… I4CE has developed a calculator to measure the effects of each of these factors on the household food budget. The result is that while the bill can fall by around 30%, it can also increase even more. And the additional cost can be particularly high for low-income households, which calls for a response from the public authorities.
EVALUATION OF PUBLIC POLICIES
For a better evaluation of public policies
These are two examples, among others, which show that it is necessary to better evaluate public policies in order to provide the government and parliamentarians with all the information they need to make informed decisions. The systematisation of the environmental assessment of laws, promised by the Prime Minister during her general policy speech, is a step in this direction. What will happen in practice? Furthmore the administration still needs to have the necessary resources to be able to evaluate public policies. To help them, I4CE is contributing in its own way by making freely available the evaluation tools we have developed.
#I4CE_Report
What public support is available in France for energy renovation in housing?
Today, most energy renovation operations are not aligned with the objectives of the national low-carbon strategy. To ensure that public subsidies are effective, I4CE has developed the PanelRénov’ tool which analyses the economic viability of renovation projects for French households. This freely available tool can be used as a support for dialogue and evaluation of public policies.
#I4CE_Report
Bonus/malus scheme for car purchases: the need for evaluation
I4CE‘s tool for estimating ex ante the impact of the bonus-malus scheme aims to support the development of similar tools by public authorities. It shows that the current bonus-malus system should lead to a 14% reduction in new vehicle emissions by 2025, half the estimated target based on the National Low Carbon Strategy. This is even taking into account the effect of the new European standard and assuming strong technical progress. Alternative scales are proposed to reduce this gap.
INTERNATIONAL TOOLS
I4CE helps other countries finance their transition
Over the past twelve months, I4CE has trained more than 500 government officials in 18 European countries on green budgeting. Our experts have met with around a hundred think tanks in these countries to give them the keys to a green budget that is useful for debates on financing the transition. To feed our exchanges in Europe and internationally, we have also analysed the many green budget experiences in the world in order to draw lessons for the future, and we have confronted the realities on the ground in other countries by helping Costa Rica and Uzbekistan. But while the international momentum on green budgeting is building, let's not forget that it is only one step in solving the transition financing equation.
#KeyFigures
Green budgeting training in Europe
With the support of the European Commission and in collaboration with Expertise France, I4CE is training some 15 European countries in “green budgeting”. This training programme for finance and environment ministries aims to help them test such a tool.
#I4CEtude
The Good, the Bad and the Unclear : Environmental Budget Tagging
This study takes stock on the experience of some twenty countries and several international development institutions in Environmental Budget Tagging. It identifies the expected benefits and the conditions to achieve them: take into account the measures that are unfavorable to the environment, consider the outcomes of assessed measures and not only their intention, repeat the exercise over time and fit it into the existing administrative culture and processes…
#WordsFromTheResearchers
Turn green budgets into green AND social budgets ?
#Webinar
Civil society mobilisation on green budgeting
In order to support the dissemination of green budgeting practices in Europe, I4CE has organised a webinar to help civil society organisations take ownership of these tools, discuss their role in their implementation and thus initiate or contribute to the debates on greening public finances in their respective countries.
ADAPTATION
Adaptation is (finally!) becoming
a topic for public decision-makers
I4CE has been working for many years, and again in recent months on the occasion of the release of the IPCC report, to ensure that the issue of adaptation is seriously considered. As awareness is only a preliminary to action, in 2022 we published new information on the need for public funding for adaptation, a set of measures whose total cost was estimated at 2.3 billion euros per year. 2.3 billion to be invested to reduce the cost of climate change and to avoid continuing to build buildings or transport infrastructures that are not adapted to the changing climate and for which money will have to be spent again in a few years. These data are intended to feed into and facilitate budget discussions from the start of the autumn of 2022.
#I4CE_Report
To adapt to the consequences of climate change in France: how much are we talking about?
This new I4CE study reviews 11 adaptation sectors, from strengthening civil security to reshaping coastal areas and making transport infrastructures more resilient. For each of them, it identifies the measures to be put in place immediately and the associated public funding needs. Other measures will have to be taken but will first require arbitration on the level of ambition or the sharing of the effort between the public and private sectors. The study identifies the cost elements available to support these major collective choices.
Report in English to be released in september.
#Press
LE MONDE
Climate change: the cost of adaptation for France assessed for the first time
This article from Le Monde tells about how I4CE lists eighteen unavoidable measures, representing an additional budget of €2.3 billion per year, to “make up for lost time”.
LOCAL AUTHORITIES
Local authorities at the heart of the transition... but with what means?
But will they have the means? At a time when the budgetary constraints on local authorities are increasing and they too must pay the price of inflation, the State and local authorities will have to resolve this problem. To help them face this challenge calmly, on the basis of a shared observation, I4CE first developed a method for evaluating the climate of local budgets. It has been updated so that the Regions can also use it. But this is only the beginning. In September 2022, I4CE will publish its first estimates of the public financing needs of local authorities for the climate.
#KeyFigures
Framework for climate budget assessment for cities
As part of the Evaluation of local authority budgets project, I4CE met and trained local authorities, metropolises and regions across France.
#I4CEproject
Quanti-neutrality : local and regional authorities’ expenditures to achieve carbon neutrality
In order to contribute to the achievement of France’s climate objectives, the climate expenditure of local authorities will have to increase in many sectors. The objective of this project is to estimate these expenses, both for investment and operation. The first publications of this project are planned for the autumn.
FINANCIAL REGULATION
Climate finance regulation broadens its scope
Awareness of the technical limitations of the risk-based approach is helping to broaden scope. What if financial regulation were not only to anticipate climate-related risks to stability and financial institutions, but also to encourage them to contribute to the orderly decarbonisation of the economy and its adaptation to global warming? This is the best way to avoid a disorganised, delayed and costly transition and, ultimately, to protect ourselves from climate risks. But how to translate this new scope into regulations? After contributing to the reform of reporting requirements, I4CE continues to explore new regulatory tools such as penalising factor of the most polluting energies or requiring banks to have a transition plan.
#I4CE_Report
Scenario analysis of transition risk in finance – Towards strategic integration of deep uncertainty
Scenario analysis can help financial institutions to better understand climate risks, but it is not currently used in a satisfactory manner. In this study, I4CE provides financial institutions and regulators with a checklist of actions to ensure that scenario analysis leads to better strategic integration of transitional climate risks. It should also help to mobilise teams throughout the process and encourage them to review their decision-making processes.
#I4CE_Report
Climate stress tests: the integration of transition risk drivers at a sectoral level
To measure the vulnerability of financial institutions to different scenarios of economic decarbonisation, central banks and supervisors are trying out “climate stress tests” and the Commission intends to support this movement with its new sustainable finance strategy. While the pilot exercises use decarbonisation scenarios that consider the economy as a whole, I4CE‘s latest study explores the value of using more detailed scenarios. To capture the risks to financial institutions, shouldn’t we look at how each sector – from cement to real estate – might transform?
#I4CE_Report
Indexing capital requirements on climate: what impacts can be expected?
I4CE has conducted the first quantitative study on Green Supporting or Penalising factors. It shows that, although they can be a response to a risk problem, their impact on financing the transition is likely to remain limited. Other options are to be explored and favoured, which receive much less attention, such as the obligation for banks to set up transition plans.
PUBLIC DEVELOPMENT BANKS
I4CE pushes the boundaries of climate action
These are some of the new challenges that I4CE has been working on recently to help public banks anticipate. We can rely on our network of international partners, including the 50 or so banks in the Mainstreaming Climate in Financial Institutions initiative, to identify the challenges ahead and the solutions. As they move forward, public banks need to push the 'frontiers of alignment'. Current frontiers that I4CE continues to explore include operationalising carbon neutrality commitments or incentivising financial intermediaries to take climate action.
#I4CE_Report
Long-term strategy use for Paris-aligned investments
This I4CE report focuses on the role of countries’ Long-Term Strategies (LTSs) in the Paris alignment approaches of Development Finance Institutions. 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.
#I4CE_Report
Adaptation: Public financial institutions (also) have a role to play
#Initiative
Mainstreaming Climate in Financial Institutions
With 53 financial institutions, Mainstreaming Climate in Financial Institutions is a unique international forum for public and private financial institutions to discuss how to mainstream climate change. At COP26, the initiative launched its new name, its new website and the new Climate Mainstreaming Resource Navigator tool to help connect financial institutions with the expertise they need to advance their mainstreaming journey.
BUDGET & PARTNERS
A valuable core funding
What is this money used for? Primarily, these funds are used to employ the experts that work for I4CE and the support staff that assist them on a daily basis: administration, communication and management. Unlike other comparable institutes or think tanks, I4CE has chosen to produce its studies with experts who are employed directly by the Institute and are developing their skills within the organisation. This approach eliminates the need to outsource experts who are volunteers, paid on a per-assignment basis or having working groups that bring together experts from other organisations.
In 2021, 58% of I4CE‘s funding comes from core-funders, who support I4CE‘s work as a whole rather than individual projects. Initially, the core-funders and founders of I4CE were the Caisse des Dépôts et Consignations and the Agence Française de Développement. In 2016, I4CE welcomed the addition of the Caisse de Dépôt et de Gestion du Maroc and more recently they have been joined by GRDF and the asset manager Meeschaert.
This core funding is extremely valuable. It allows the Institute to launch new and innovative projects and gives I4CE the freedom to choose its research projects. It also allows the Institute adequate time to promote its work effectively.
In addition to this core funding, I4CE benefits from project-based funding, which is targeted on specific projects. Many of the project-based funders have been collaborating with I4CE for many years. As a result, the institute gains visibility on its funding and is able to build a relationship of trust with its funders. However, project funders do not define the I4CE projects. The Institute conceives projects of general interest and then approaches its funders for support. I4CE rarely responds to tenders and if they do, it is only when the studies commissioned are aligned with the Institute’s work projects.
The majority of the project-based funding comes from public institutions: ADEME, Ministry of Ecology, local authorities, European research programs, French National Research Agency. The rest comes from private institutions: philanthropic foundations (European Climate Foundation, Carasso Foundation) and private companies, mainly in the form of subscriptions to I4CE‘s Agriculture and Forestry Clubs.
CARBON FOOTPRINT
I4CE commits to carbon neutrality
But unlike many countries, as travel resumed after the Covid lockdowns, and as I4CE expands internationally, our transport emissions have continued to fall. How is that? Thanks to the train, which has now become the standard travel mean. Our rule: no airplane if an alternative by train of less than 6 hours exists. The I4CE team travelled more than twice around the world by train in 2021.
Videoconferencing and more generally digital technology have also allowed I4CE to develop internationally while limiting its travel. But this obviously raises the question of the carbon footprint of digital technology. We have tackled this issue and are happy to announce the launch - today - of our new sustainably designed website. Unfortunately, there is no quality certification (yet), but we have done our best to reduce our website’s footprint. The homepage footprint has been divided by 4.
I4CE’s climate action plan
I4CE committed, since 2019, to carbon neutrality, to set an example, out of conviction, and to face the actual transition issues. An internal working group was established to define an emissions reduction action plan, to undertake each year a carbon footprint assessment of the institute and therefore to assess our progress and to suggest new actions. You may find below all actions undertaken to date by I4CE. This emissions reduction plan will be completed by an adaptation plan to climate change impacts.
