Publications

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.

The reform for a new global financing pact - as it was ambitiously designated by the French President Emmanuel Macron - allows little time for rest, combining several agendas that collectively seek to rethink how the Global South can finance its low-emission development pathways, with support from the Global North. The sequence of international events that starts this week with the Finance in common Summit, the African climate summit, G20 and followed by World Bank Group and International Monetary Fund’s Annual Meetings will be key to see if the multiple resolutions to reshape development finance outlined during the first semester of 2023 were merely wishful thinking or if they can be seen as the first bricks of a new international financial architecture. 

Sustainable development and climate change are two pressing and interconnected issues that countries have committed to address at the international level. The 2030 Agenda for Sustainable Development, with the 17 Sustainable Development Goals (SDGs) including climate action, at its core was adopted by the United Nations (UN) in 2015. The same year, the Paris Agreement was adopted by Parties of the UN Framework Convention on Climate Change. Both instruments have clear global and national targets in the medium- and long-term that are still far from being met.

The French decision to define a reference warming trajectory for adaptation to climate change (TRACC) is good news. There is an urgent need for public and private actors to examine the resilience of their investments and activities in a changing climate, including if the target of limiting global warming to below +2°C – a target that must remain a priority – is not met. Going beyond its inclusion in the PNACC (French national climate change adaptation plan) will nevertheless be essential to ensure actors rapidly take up this trajectory and to prevent a single euro more being spent on assets that are not adapted to climate change. The cross-cutting and normative scope of the TRACC now needs to be guaranteed by making it an inter-ministerial issue and putting it into legislation, then progressively tailoring the implementation requirements to the different actors and sectors concerned.

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.

On 22nd and 23rd of June, the Summit for a new Global Financing Pact, initiated by Emmanuel Macron and Mia Mottley, Prime Minister of Barbados, will take place in Paris. This Summit will be a success for climate if it enables us to spend more on the climate transition, to spend better, and if it influences the ongoing reform of international development financing.

National budgets, as the main driver of public action, need to be ‘greened’ by governments to achieve the transition to low-carbon, climate-resilient, and sustainable economies. That is, budgeting processes need to ensure sufficient funds are directed towards green activities and are directed away from environmentally harmful ones.

This blog-post is conducted by [i4ce] and IDDRI. The international community recognizes that the global development finance architecture is no longer fit for purpose. The World Bank, the IMF, and other institutions of the broader development finance system are today asked to invest more in global goods (specifically to fight against climate change and to preserve biodiversity, but their internal structure and the paradigms on which they ground their decisions have not changed since they were created with development – poverty and macroeconomic stability notably – as their main mandate. In this context, it should be no surprise that the response of these international institutions remains inadequate in terms of volume, structure and accessibility. 

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.

Let’s cut to the chase. Emmanuel Macron was wrong to drop a rhetorical bomb on Thursday, 11 May, when he called for a “regulatory pause” in environmental legislation. And that was a real shame because shortly after doing so, he said something important that went unnoticed by the analysts: Europe and France risk “being the best performers in terms of regulation, and the worst performers in terms of financing”.

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.

This is it. In a few days, thousands of people from around the world will be gathering in Washington to look back on the latest achievements and discuss the future of the World Bank and the International Monetary Fund – the two institutions that structure international cooperation for development. But this isn’t just one of a series of biannual get-togethers. These Spring Meetings will be the last for future ex-President of the World Bank David Malpass, who is leaving at what might be a turning point for the institution’s history. The expectations are high: this is the moment where the World Bank’s shareholders will confirm their vision and ambition for the institution by officially including climate in its global mission

After years of waiting, the World Bank finally approved and released its alignment approach with the mitigation and adaptation goals of the Paris Agreement. Presented by the World Bank as “the most comprehensive institutional undertaking ever done by the Bank Group to reconcile development and climate”, this alignment approach is an important step towards the reform of the World Bank currently under discussion. But this approach won’t be sufficient, argue Alice Pauthier and Sarah Bendahou in this blog post. It could be more ambitious.  

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.