The EU must match its climate ambitions with corresponding financial resources or otherwise risks missing its objectives, Jean Pisani-Ferry, a senior advisor to the French government, told EURACTIV France in an interview.

Read the full interview in French here.

In May, Pisany-Ferry led a report on “the economic impact of climate action” for France Stratégie, the government’s in-house think-tank attached to the Prime Minister’s office.

That report made waves in France, with Industry Minister Roland Lescure comparing it to the emblematic Meadows report (1973) on the limits to economic growth and the Stern report (2007) on the economics of climate change.

The study is the first to look in detail at the cost of fulfilling the goals of the Paris Agreement on climate change.

This was done by “granularly counting the concrete costs of achieving carbon neutrality, such as replacing heating systems, insulating buildings or replacing combustion-powered vehicles,” Pisani-Ferry told EURACTIV in an interview.

In France, that would amount to €66 billion per year between now and 2030, or about 2% of the country’s annual GDP.

To close that gap, the study recommends a 50-50 split between public and private investment in France – a ratio that goes down to 30% for public investment at EU level because of spending constraints.

“Public authorities should take on a proportion of private investment because the most vulnerable households or small and medium-sized businesses are not in a position to finance themselves,” Pisani-Ferry argues.

While he says his report was well received in Brussels, Pisani-Ferry nevertheless expressed surprise that no similar work has been carried out in other European countries or by the EU institutions.

This, he warns, poses a problem for the achievement of the EU’s climate and energy objectives.

“I have the feeling that, at the European level, we have set ambitious transition targets without sufficiently considering the economic implications,” he points out.

EU’s own resources?

In response, Pisani-Ferry recommends easing up on the EU’s budgetary straightjacket.

“We are not asking for massive indebtedness on the part of member states, but for adapting the rules on public debt imposed by the EU,” argues the former Director of Ideas and Programmes for Emmanuel Macron’s 2017 presidential campaign.

Relying on the EU’s so-called “own resources” could well be a possibility looking forward, according to the French expert.

Given that the EU has moved from “a policy of integration through trade and capital flows to a policy of managing European or global ‘public goods’ such as the climate,” EU funding “inevitably” needs to be considered, he argues.

However, this does not mean “conferring new powers on the EU,” Pisani-Ferry adds.

In a report submitted in 2020 to Olaf Scholz, then German Finance Minister, Pisani-Ferry proposed that part of the revenue from the EU carbon market be redirected to EU finances for that purpose.

This type of approach “can be implemented and extended without conferring new powers on the EU,” he explains.

On the other hand, giving the EU fiscal powers is out of the question at this stage because that would mean changing the nature of the European project and making a “major leap into federalism”.

That said, Pisani-Ferry believes that “by committing to climate objectives at the European level, we are de facto moving in a federalist direction”.

But this is not the issue. For now, “what we need above all is coherence” between the EU’s climate ambition and its budgetary means, he said.

Ultimately, “we plead for the EU to be given the financial resources to meet the responsibilities it assumes,” he concludes.

[Edited by Frédéric Simon]

Source: Euractiv.com