Publications

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.

After the sudden resignation of David Malpass, the World Bank’s Trump-appointed President, mid-February, Washington surprised the world again last Thursday, with the nomination of Ajay Banga, long-time Mastercard CEO, as his potential successor. Not only was the timing very rapid, but the controversial profile of the nominee also generated some sense of puzzlement. His limited […]

This report co-written with NewClimate provides practical guidance for international financial institutions to support financial institutions’ alignment with the Paris Agreement goals, and to more broadly contribute to transforming local financial systems. This guidance is developed around three pillars: a harmonised alignment assessment; the alignment of financial intermediaries; and the alignment of financial systems at the national level.

Livestock population in France has been falling for several decades (-20% for dairy cattle and -33% for sows since 2000), without necessarily reducing the quantities produced. But productivity gains will not be able to maintain production levels forever. For the decline in livestock farming to have an impact on the climate, it must be accompanied by a drop in meat consumption, but is this really happening?

Accompanying the decline in livestock numbers. All transition scenarios rely on a decline in livestock numbers to meet climate targets. Yet in France, most livestock populations are already declining. The challenge is not only to continue this trend, but also to support it, to ensure a fair and acceptable transition for livestock farmers and other players in the livestock industry. This is particularly true for the dairy sector.

The proposal for mandatory climate transition plans for banks is slowly making its way through the regulatory debate. Proposed by the European Commission and confirmed by the EU Council, this proposal has now also been taken up by the European Parliament. This obligation could be a game-changer for financial risk management and the alignment of financial flows with the transition to a low-carbon economy. It could lead banks to limit their activities in climate-damaging activities, adjust their business models, review their strategies as well as their governance and risk management procedures.

The legislators in Europe are discussing the introduction of mandatory climate transition plans for banks. After the European Commission and the Council, the European parliament has adopted its position. Now trilogue negotiations between the three will begin. While all three seem to agree on the idea itself, differences remain in how these plans are defined. Anuschka Hilke, Director of the Finance program from the Institute for Climate Economics (I4CE), explains in this blog which parameters will be decisive for framing the ambition of this legislative proposal.

Last August, the US Congress adopted the Inflation Reduction Act (IRA). It became the epicentre of EU fears of seeing cleantech projects, like battery or solar panel gigafactories, settling in the US rather than in the EU. There is some rationality behind that fear. The IRA indeed provides sizable public funding, with 10 years predictability and the simplicity of having a single federal level scheme. Moreover, the IRA does not only subsidize cleantech manufacturing. For instance, in the case of electric vehicles, the IRA supports the mining of critical minerals, the manufacturing of the battery, the purchase of the electric car and the production of renewable electricity. In other words, with IRA the US now has a genuine long-term climate investment plan.

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.

While French local authorities have important levers for adaptation, they will only be able to mobilize them if certain conditions are met at national level: the entire effort cannot rest on their initiative alone. This is what this I4CE's Climate Report shows. There is an urgent need for a discussion on adaptation between the national government and subnational authorities.

2022 ended up on a consensus that the global financial architecture is no longer “fit for purpose”. In other words, the financial ecosystem created post-war to support international development - at the centre of which are the IMF and the World Bank who were joined later by other international public financial institutions - wasn’t designed to address the multiplicity of challenges the world is facing today, foremost among which climate change. Time is running, and the good news is that 2023 is set up to be a busy year with key events setting the milestones for a reform of the international financial architecture, including a Paris Summit in June. The year will close at COP 28, where we will officially take stock of current achievements.

2023 will be busy with many events organised to address different parts of the financial architecture reform, including a Paris Summit in June. Alice Pauthier from [i4ce] tells you more about this agenda and identifies two conditions for a successful reform process. First, it has to be led by countries’ financing needs… wheras we are still lacking a granular analysis of countries’ investment needs for a sustainable development. Second, it has to be guided by the objective of maximising the impact of public finance. What we should count is the impact of public finance on the transition and not only volumes.

Private finance will not fund the transition without a stronger commitment from public authorities. For several years, and particularly since COP 26, considerable time and attention has been dedicated to the subject of voluntary commitments from private financial actors. These commitments, made within the framework of international initiatives, should in principle enable private finance to be mobilized for the transition to a carbon neutral economy.

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.

2022 was an eventful year in terms of climate. The year saw the emergence of a new concept, that of the polycrisis: war in Ukraine, the aftereffects of Covid, the return of inflation, the gas crisis, agricultural shortages, persistent droughts and other dramatic climatic events... all of these crises have ultimately pointed to our direct or indirect dependence on fossil fuels; our weaknesses when faced with a changing climate; and the vulnerability of our economies and the middle and lower classes.

How can we differentiate between projects that really enable carbon to be stored and those that only claim to do so? This is a complicated question when dealing with projects in agriculture and forestry, where quantifying carbon storage is complex, and where other environmental challenges, like the preservation of biodiversity, must also be taken into account. A complicated question, therefore, but one that needs an answer! Private actors and public authorities want to ensure that the agricultural and forestry projects financed in the name of the climate have a real environmental benefit.

Yesterday, 30 november 2022, the European Commission adopted a proposal for a first EU-wide voluntary framework to reliably certify high-quality carbon removals. This proposal provides a framework, broad guiding principles, and the details will be specified in 2023 supported by an expert group on Carbon Removals. “The devil may be in the detail”, but the framing is no less important. Claudine Foucherot of [i4ce] has analysed it and identified four points on which we must be vigilant. Overall, it can be said that the Commission is submitting an ambitious proposal, which nevertheless presents a risk: not being sufficient incentives to ensure a massive deployment of certified projects.    

According to I4CE's research, to meet European and international commitments made by France to carbon neutrality, French local authorities need to more than double their annual climate-related investments (from €5.5 billion to €12 billion annually), to around 20% of their current total capital expenditure.  

One year ago the creation of the Glasgow Finance Alliance for Net Zero - GFANZ – was announced. The expectations were as big as the numbers: a coalition gathering 500 financial actors representing 130 trillion dollars. Private financial actors were finally stepping in and mobilizing. But one year later, the coalition raises many doubts. On one side it faces criticism from NGOs, and on the other some US actors are considering leaving the coalition under the pressure of members of Republicans Party.