France needs to invest €66bn a year on climate action, government report states

by Paul Messad

France must spend €66 billion every year until 2030 in order to hit its climate targets, a new report by a government advisory body says, suggesting more debt and taxing the rich as a way to foot the bill.

France Strategie, an advisory body attached to the Prime Minister’s office, published its report Monday (22 May) on the economic costs of meeting the objectives of the Paris Agreement on climate change.

“This report will be a landmark in the economics of climate change. Like the Meadows report,” Industry Minister Roland Lescure told EURACTIV France. The Meadows report, published in 1972, was the first to theorise the limits to economic growth in the context of climate change.

According to the report, climate action will cost France more than €66 billion annually until 2030. Of that sum, €48 billion will have to be spent on renovating buildings – whether business, residential or public. Another €7 billion a year will have to be invested in the energy field, while €3 billion a year will need to be spent on road transport.

The catch, however, is that a large part of these investments will have to be provided by households, the report notes. Switching to an electric car and renovating the home, for example, come at a price tag which is worth one year of salary for middle-class households and two years of salary for many others in the lower income bracket.

“If we do not work on the issue of social justice in this transition, we will go from failure to renunciation”, said Cecile Duflot, a former minister now director of Oxfam France who was invited to the report’s presentation on Wednesday (24 May).

To do this, it will be necessary to finance the transition through public finances, to the tune of €25-34 billion annually, the report says.

Leveraging public finances

To secure public financing, the report proposes redirecting public finances from fossil fuels to clean energy.

However, this may not be enough, said Jean Pisani-Ferry, a leading economist and main author of the report. If this course of action is insufficient, France will have to go into debt to the tune of 10% of its GDP in 2030, and 25% in 2040, the report adds.

Pisani-Ferry pushed back against expected EU resistance to new debt, saying “there have been many silly reasons to go into debt, the climate not being one of them”.

As a third solution, the report’s authors recommend a temporary tax on the financial assets of the wealthiest households, an idea immediately dismissed by Economy Minister Bruno Le Maire, who told RTL that “a new tax is not the solution,” preferring greening public investments instead.

“At least the debate is on the table,” Pisani-Ferry said.

In addition to public funding schemes, the report recommends three additional measures: replacing existing technologies with green ones, substituting capital spent on fossil fuels and reducing energy consumption.

Turning to Europe, the report gives a word of warning: the EU “cannot be a champion of climate, a champion of multilateralism and a champion of fiscal virtue at the same time,” it says, noting that the EU is currently having a hard time competing on the world stage because of high energy prices and tougher competition from the US.

The report thus calls for rethinking EU budget rules, with Pisani-Ferry saying member states should be given more leeway on national spending.

*first published in: Euractiv.com