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COMBINING ECONOMIC RECOVERY WITH THE

ANNUAL REPORT 2019/2020

Une initiative de la Caisse des Dépôts et de l’Agence Française de Développement EDITORIAL

“BEING ABLE TO MOBILIZE EXPERTISE OUR QUICKLY, THAT IS THE Contents MISSION - ADDED VALUE OF EDITORIAL The Institute for Climate THINK TANKS” Pierre Ducret 1 Economics is a think tank with expertise in economics THEMES and finance whose mission Investsment 2 is to support action against Budget 4 . Territoiries 8 Through its applied research, Adaptation 10 the Institute contributes to HE ECONOMIC CRISIS THE EXPERTS AT I4CE WERE Finance 12 the debate on climate-related ASSOCIATED WITH ABLE TO RISE TO THIS COVID-19 HAS SHAKEN CHALLENGE RIGHT FROM THE Carbone market 16 policies. It also publicizes UP THE PUBLIC POLICY EARLY MONTHS OF THE CRISIS, Fiscality 18 T research to facilitate the AGENDA, PARTICULARLY IN and will continue to do so. They have Agriculture 20 analysis of financial TERMS OF FUNDING THE FIGHT formulated numerous proposals and AGAINST CLIMATE CHANGE. The analyses, which you can read about Entreprises 22 institutions, businesses and huge injection of public funding has in this activity report. They were the territories and assists with created new opportunities, and first to make the case for a green Publications 23 equally big risks. With the full brunt of PIERRE DUCRET recovery and set out how it can be the practical incorporation Clubs 24 the crisis being felt by sectors that are President I4CE done. Since early April, I4CE’s climate of climate issues into key to the low- transition, the investment plan for the economic their activities. need to protect jobs may mean that sectors that recovery has been presented to about one hundred

INFORMATIONS OUR EXPERTISE should be changing are maintained as they are. members of parliament, the same number of Governance 26 businesses and about fifty members of civil society. THE CHALLENGE FOR I4CE HAS BEEN TO Budget 27 REACT QUICKLY AND CONTRIBUTE TO THE THIS RESPONSIVENESS WOULD NOT HAVE Team 28 STRATEGIC DEBATE ON ECONOMIC RECO- BEEN POSSIBLE WERE IT NOT FOR I4CE’S VERY, mobilising the expertise it has carefully LONG STANDING AND SUPPORTIVE PARTNERS. developed over time on the economic and financial It is thanks to them, and in particular CDC, AFD, issues involved in the low-carbon transition. Develo- ADEME, CDG and the Banque de , that we had ping expertise over long periods and being able to the human and financial means to develop the mobilise it quickly when the need arises is the expertise that has proved so valuable in the current challenge of all public policy research organisations, situation. We thank them all. of all think tanks. Taking on this challenge is their added value, their raison d’être.

IV — I4CE / 2019 - 2020 — OUR ADDED VALUE: I4CE KEY FIGURES ECONOMIC AND FINANCIAL EXPERTISE

27 CLIMATE INVESTMENT VOLUNTARY CARBON PUBLIC FINANCE Team members AND TRANSITION CERTIFICATION INSTITUTIONS FINANCING AND THE LOW-CAR- BON STANDARD 30 + Events annually

TERRITORIES PRIVATE FINANCE ADAPTATION AND + AND LOCAL RESILIENCE 40 AUTHORITIES Publications annually 7000 + Twitter Followers FINANCIAL AGRICULTURE PUBLIC BUDGETS, REGULATION FOR AND FOOD TAXATION AND THE CLIMATE

+6000 OUR EXPERTISE Newsletter subscribers

FORESTRY AND EU ETS BUSINESS AND 400+ TIMBER INDUSTRY AND REGULATORY INDUSTRY Press articles CARBON MARKETS #Investment KEY FIGURES - ECONOMIC RECOVERY PLAN

How to finance 9 1 PUBLIC INVESTMENT 2 PUBLIC CO-FINANCING particularly in public grants, subsidized loans billion 7 euros/year buildings and transport climate action of public stimulus in : networks

OBLIGATIONS FINANCIAL 13 MECHANISMS 6 3 4 key sectors of MEASURES to carry out retrofitting of enabling projects to start the low-carbon transition existing buildings, with little or no upfront targeted and phased over capital (“zero out-of- to generate time pocket”)

In the context of the economic 21 TAX INCENTIVE TECHNICAL SUPPORT billion euros/year 5 6 recovery, I4CE has proposed a public a medium-term tax integrated into financial of additional INVESTMENT incentive specific to each tools, for local govern- funding package of an additional sector to make low-carbon ments, households and projects cost-effective companies 9b€ per year for the climate. The real “In the coming @I4CE_ challenge will be to keep increasing months, debt will not be as easy a solution this funding post 2020. as it is today.”

— Further Are we going to make the same And yet the recovery plan reading on mistakes again and try to rebuild proposed by I4CE shows that this topic: HADRIEN HAINAUT PROJECT MANAGER INVESTMENT an economy that pollutes and a is possible, for excludes exactly as it did before? a reasonable amount of additional public investment Or will we seize the unique given the amounts invested to he crisis is affecting incentives. Many key sectors in the low- with the rising number of projects opportunity represented by help the economy recover.

recovering from this crisis to Investing in Climate a number of eco­ carbon transition were analysed, and the development of low-carbon can Help France Drive its Economic Recovery

Paris, nomic sectors that starting with building renovation, rail markets. According to our estimations, redirect our economies towards The priorities put forward by April 2020

Authors: Hadrien Hainaut | Maxime Ledez | Quentin Perrier | Benoit Leguet (I4CE) | are essential in the , urban public transport the 9 billion euros required today will a model that is more sustainable I4CE - thermal renovation, Patrice Geoffron, Université Dauphine - PSL low-carbon and renewable heat and gas. more than double by 2024. and more inclusive, in line with electromobility, rail and urban transition, like rail the international climate public transport - can mostly be commitments made during found among the 149 proposals Investing in climate and urban public ACCORDING TO OUR ESTIMATIONS, PUBLIC AUTHORITIES, STARTING can help France drive COP21? from the Citizens’ convention its economy recovery transport among many others. These THIS PACKAGE WOULD RELEASE WITH THE STATE, could provide T for climate. It is clear, and both are sectors in which France and its ROUGHLY 20 BILLION EUROS OF visibility by committing to a budget Laurence Tubiana This is what the majority of experts and citizens agree; people were already investing too little INVESTMENT for the climate each over several years in the next budget CEO of the European citizens want. Studies carried what is missing is political will. before the crisis began. Whether to year, for 9 billion euros of additional bill, and clarifying how they plan to Climate Foundation out over the past few months insulate buildings, buy a low-carbon public funding. A significant amount meet these growing needs. In the show that the health crisis has Let us remember that another vehicle, build sustainable transport which nevertheless remains modest coming months, debt will not be as GREEN RECOVERY: not detracted from concern recent study, carried out by EY Landscape of infrastructures, or produce low-carbon in view of other public expenditure easy a solution as it is today. WHAT ARE WE about the environment and the France for WWF France, shows in France energy, the French government, and potential rewards in terms of Edition 2019 WAITING FOR? climate, which is still at record that a green recovery would Hadrien Hainaut | Maxime Ledez | Ian Cochran businesses and households invested the economy, air pollution and energy levels. On the contrary: support a million jobs by the end 46 billion euros in 2018, when the insecurity. according to a study by Destin of the quinquennium, which is country needed to invest at least 15 commun (published in two times more than a traditional Landscape of climate finance in France billion more to put itself on the path to THE REAL FINANCIAL CHALLENGE Never let a good crisis September), 65% of French recovery. Not to mention the . To bridge this gap WILL BE TO CONTINUE TO PROGRES­ go to waste, said Winston people want to see ‘big other benefits, in particular for and help the economy recover, I4CE SIVELY INCREASE CLIMATE-FRIENDLY Churchill after the Second changes’ in the aftermath of health and quality of life. has proposed a public and private PUBLIC FUNDING POST 2020. Even World War. This idea has rarely Covid-19. But at the same time, So, what are we waiting for? finance package, underpinned by a if the leverage of public funding is been as relevant as it is now. 70% think this will not happen. range of economic and regulatory improved, this funding must grow

2 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 3 #Budget G20 PUBLIC MONEY COMMITMENTS IN RECOVERY PACKAGE, AS OF 15TH OF G20: 151b$ for fossil JULY 2020 (USD BILLION) France fuels since the start India Fossil unconditional

of the crisis Indonesia Fossil conditional Republic of Korea Clean unconditional Italy Clean conditional Turkey Aid granted by G20 countries since Other energy Russia the start of the pandemic has so far favoured the production and use of Saudi Arabia fossil fuels over clean energy. “We need a second wave of measures to combine the recovery 0 10 20 30 40 50 60 70 80 90 100

with climate” @I4CE_ source: EnergyPolicyTracker.org

LOUISE KESSLER DIRECTOR OF ECONOMY PROGRAM

ince the start of and to generate from fossil The predominance of aid given to The international consortium the health crisis, sources. Part of this assistance was fossil fuels of course reflects the fact behind EnergyPolicyTracker.org is govern­­ments made conditional on the industries that the economy, broadly speaking, made up of: around the world involved committing to reduce still depends too heavily on carbon. • International Institute for have spent huge emissions (‘environmental conditio­ But this is still concerning for the (IISD), sums to save nality’) but this is of questionable low-carbon transition. While Germany, • Institute for Global Environmental businesses­­ and value either due to the vague nature the United Kingdom, and even China Strategies (IGES), then revive the economy. On top of of exchanges or because they have spent more on clean energy than on • Oil Change International (OCI), S • Overseas Development Institute state support provided to all businesses no binding nature. The consortium fossil fuels, the opposite is true for - like the chômage partiel in France - estimates that 20% of aid supporting countries like France, Australia, (ODI), specific aid has been granted to fossil fossil fuels had such conditionality, Canada and Saoudi Arabia. The • Stockholm Environment Institute (SEI), fuel intensive industries or alternatively a figure that is much higher in certain recent announcement made by Prime • Columbia University in New York, to clean energy industries. countries, including France. Minister Jean Castex of a 20 billion € ENERGY POLICY TRACKER PROJECT Forum Ökologisch-Soziale package for the ecological transition Marktwirtschaft (FÖS), ACCORDING TO ESTIMATIONS BY THE SUPPORT PROVIDED IN FAVOUR could reverse this trend in France. Since the start of the crisis, 80% of global emissions, and the • Fundación Ambiente y Recursos I4CE and 13 other research institutes OF CLEAN ENERGY, like energy governments around the world have different financial instruments used by Naturales (FARN), that have come together in an efficiency, or cycling, THE FIRST WAVE OF MEASURES TO adopted many measures to safeguard their governments: secured loans, cash • Instituto de Estudos international consortium, the financial grew to 89 billion $ in early July. 80% SAFEGUARD and revive the economy and then help the economy recover. advances, public investment, subventions, Socioeconômicos (INESC), commitments made by G20 countries of this aid concerns technologies were launched as an emergency These measures will have an impact on tax benefits. • Institute for Climate Economics from the start of the pandemic up to that are key to the low-carbon response to support the sectors that emissions. To help you The site will gradually expand to include (I4CE), early July 2020 have been far more transition, but their environmental were hardest hit by the crisis and to make sense of it all, a consortium of other countries and will be updated • Instituto Tecnológico Autónomo favourable to fossil fuels than clean impact depends on the energy source protect jobs. We now need a second 14 think tanks including I4CE launched regularly, to see if future recovery de México (ITAM), energy. 151 billion $ were invested that is used. This is true for electric wave that combines the economic the website EnergyPolicyTracker.org measures set the world on track for • Legambiente, REN21, The in intensive industries, vehicles in countries where electricity recovery with climate protection. in July. This site looks at the G20 carbon neutrality. Australia Institute (TAI). mainly aviation and the auto industry, is not completely carbon-free, and countries, which are responsible for as well as in fossil fuel production rail transport.

4 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 5 #Budget Citizen proposals for the climate and economic recovery

The proposals put forward by the Citizens’ convention for Climate could help the economy recover, by stimulating investment in building or “The citizen proposals transport. But at what cost for public are in no way a ‘Marshall plan’” finances?

QUENTIN PERRIER PROJECT MANAGER TAXATION

work, part of the 11 billion required

n June 21, the implemented at a very reasonable could come from companies via Public Session members of the cost. This initial assessment is a Energy Saving Certificates, which of Citizens’ convention for Climate Citizens’ clear signal that the citizens were would reduce the cost to the state. SHORT TERM IMPACT ON PUBLIC FINANCES in February 2019 convention for able to come up with a wide range On the revenue side, the President (B€/YEAR) climate put of actions, including investment and of the Republic used one of his wild forward a range subventions, but also taxation, cards to rule out a tax on dividends. of proposals to reglementation and information. Lastly, some expenditure could Oaccelerate the transition to a low- quickly evolve over time, notably 6 +5 carbon economy in France. These ALL IN ALL, I4CE ESTIMATES AN the bonus-malus vehicle incentive 4 proposals come at a timely moment to IMPACT ON PUBLIC SPENDING in scheme if electric vehicles became +2 +2 Increasing bonus for 2 low-carbon vehicles — Further feed into the country’s economic the order of 6 billion euros per year widespread. reading on recovery program. I4CE has made a in the short term. This net cost is the 0 this topic: Increasing penalty provisional assessment of the cost of total of the four spends above, NEVERTHELESS, THIS PRELIMINARY -2 on polluting vehicles these measures to the public purse. representing 15 billion per year, COST ASSESSMENT HELPS US -2 -2 Environmental and health co-benefits of public action -4 « it’s (also) the economy, stupid ! » Paris, minus three income streams that establish orders of magnitude in Mai 2020 Patrice Geoffron (Université Paris-Dauphine, PSL) | Benoît Leguet (I4CE) Terra Nova’s “Coronavirus: views of a crisis” series of contributions endeavours to provide a platform for sharing ideas, accounts and questions generated by the Covid-19 pandemic and Increasing its widespread consequences. We wanted on this occasion to invite contributions from a wide range of external partners from varied backgrounds, including observers, participants and experts, thereby creating an open laboratory of ideas. The ideas expressed do not necessarily OF THE 149 CITIZEN PROPOSALS, represent 9 billion euros per year: a order to clarify public decision-making. -6 on flights reflect Terra Nova’s collective positions. -6 BRIEF Story or legend, the “It’s the economy, stupid!” slogan that supposedly helped bring Bill Clinton to power in 1992, highlights the tendency of voters to prioritize the economy ONLY FOUR REQUIRE SIGNIFICANT higher penalty on polluting vehicles, We can see that the amounts in question in times of crisis. After the lockdown imposed by Covid-19, there may be a strong temptation, when developing and implementing an exit strategy, to favour taking into -8 account directly observable economic impacts, without any other considerations, as was the case after the 2008 crisis. Here we show that any exit policy must be subject to a broad set of requirements which values the economic, environmental and health “co-benefits” of public action. Among other examples, decarbonized transportation measures (from bicycles to rail freight) have direct effects in terms of the economy (jobs, SPENDING OF PUBLIC FINANCES. an eco-tax on flight tickets and a tax are not negligible for public finances, added value in the sectors involved), the environment (reduction of air pollution which costs France about 50 billion euros/year, reduction of ) and health (this same pollution kills 50,000 people/year, and weakens populations when -10 Tax on company they are exposed to pandemics). Doing this is a matter of responding to “social demand”: in the same way, as Emmanuel Macron recently observed, when we emerge from the crisis, “people will no longer These are: support for mandatory on company dividends. but they are comparable to other dividends to fund tolerate breathing polluted air” 1. And, since between the triggering of the subprime crisis in 2008 and the exit from the emergency phase of the Covid-19 crisis, French debt will have increased by 50% of GDP, reducing the public authorities’ margin for budgetary manoeuvres, maximizing the co-benefits of action is no longer simply an and total renovation of energy inefficient budgetary decisions made by the state. -12 -11 the fight against option, it is an imperative: “It’s (also) the economy, stupid!” 1 Financial Times interview, 16 April 2020. See video here: https://www.facebook.com/8860325749/ climate change posts/10158243484920750/ buildings, investment in freight and THIS ASSESSMENT OF 6 BILLION The suppression of local residence tax, Increasing aid to improve the Environmental and health co-benefits of public action: « it’s (also) the economy, stupid ! » –I 4CE | 1 a reduction in VAT on rail services, NET IS OF COURSE APPROXIMATIVE, for example, costs the state 16 billion energy efficiency of buildings, Rail investment plan especially for low-income Balance Environmental and and a reinforced green incentive and could require modification once per year. The citizen proposals are in households health co-benefits of scheme for electric vehicles. This political decisions have been made. no way a ‘Marshall plan’, but help raise public action « it’s @I4CE_ (also) the economy, means that 145 proposals could be Regarding the funding for renovation ambitions at a reasonable cost. stupid ! »

6 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 7 #Territories There will be no ‘green

recovery’ without the FORUM Opinions

Budgets verts : au tour des collectivités !

financières et des impôts qui nous local authorities éloignent de cet objectif. Un « bud- get vert » répond par ailleurs aux demandes de transparence expri- conditioning our ability to live in LA GAZETTE mées par les citoyens, tant sur les montants alloués, prélevés qu’exo- nérés sur l’accompagnement à la (DEC. 9, 2019) transition écologique. a changing climate. L’Etat a fait un premier pas. Mais la transition vers une économie bas-carbone et résiliente au chan- Le gouvernement a rendu publique gement climatique est d’abord un rées par une évaluation environ- la première évaluation environ- enjeu territorial. C’est dans les nementale des budgets locaux. Un co-authored by: nementale du budget de l’Etat. territoires que se matérialisent les « budget vert » serait à la fois un Même si celle-ci n’est pas complè- impacts du changement climatique outil de pilotage, de mise en cohé- Local authorities are central to Ltement aboutie, elle donne déjà et que se situent quantité de leviers rence et de transparence de l’action •ANDRÉ FLAJOLET, à voir l’ensemble des actions de capables de réduire les émissions publique. Il permettrait aussi aux l’Etat qui ont un impact sur les collectivités de mettre en valeur émissions de gaz à effet de serre les actions qu’elles réalisent pour making the ecological transition vice president of the (GES), l’artificialisation des sols ou ANDRÉ FLAJOLET, lutter contre les rejets de gaz à effet encore les déchets. Le ministre de vice-président de serre ou encore de faciliter leur Association of mayors Local authorities must deal with the l’Action et des comptes publics a de l’Association des maires financement par des obligations promis qu’elle sera complétée pour de France (AMF) vertes. a success. Like for the state, in France (AMF) le budget 2021, le temps de peau- DOMINIQUE GROS, Certaines collectivités n’ont pas finer, avec l’ensemble des parties coprésident de la commis- attendu que l’Etat réalise son prenantes, la méthodologie d’éva- sion « développement propre « budget vert » pour com- durable et transition budgetary discussions within •DOMINIQUE GROS, sharp decline in revenue due to the luation. La France concrétise ainsi énergétique » de France mencer à « plancher » sur le sujet. l’engagement qu’elle avait pris lors Urbaine Il ne faut néanmoins pas sous- du One Planet Summit de 2017, en estimer le défi méthodologique que co president of the lançant, avec le Mexique et l’OCDE, MORGANE NICOL, représente un tel exercice. C’est directrice « territoires » local authorities would benefit une initiative internationale sur les de l’Institut de l’économie pourquoi, nous, AMF, France ‘sustainable health crisis. Just when they should be « budgets verts ». pour le climat (I4CE) Urbaine et I4CE, collaborons déjà A notre connaissance, c’est la avec cinq villes et communautés development and première fois dans le monde qu’un urbaines pour développer un cadre from an environmental budget pays se prête à cet exercice de de GES. Dans les collectivités commun afin d’aider les collecti- energy transition’ “As yet figures do not « budget vert ». Il permet tout locales, compétentes dans trois vités qui le souhaitent à concrétiser increasing spending for the climate. d’abord de prendre en compte les domaines clés que sont les trans- leurs démarches de budget vert. enjeux environnementaux lors des ports, l’urbanisme et le logement, Ce cadre, qui se concentrera dans assessment. A ‘green budget’ commission at France discussions budgétaires. Pour de nombreuses décisions structu- un premier temps sur les enjeux even exist on what local atteindre la neutralité carbone d’ici rantes sont prises en matière d’atténuation et d’adaptation au Urbaine à 2050, il est indispensable de d’aménagement et de développe- changement climatique, sera dif- s’assurer que nous nous donnons ment économique, et condition- fusé à tous les intéressés à partir would be a tool to both steer les moyens de notre ambition, y nent notre capacité à vivre dans un du second trimestre 2020. Rejoi- •MORGANE NICOL, authorities need to make compris financiers, et que nous climat qui change. gnez le mouvement des collectivi- réformons l’ensemble des aides Les collectivités territoriales tés dotées d’un budget climat ! l and ensure public action is sont au cœur d’une transition éco- ‘local authorities’ logique réussie. Tout comme pour the climate investments l’Etat, les discussions budgétaires director at the Institute dans les collectivités seraient éclai- coherent and transparent. It for Climate Economics required!” 22 MORGANE NICOL DIRECTOR OF TERRITOIRIES PROGRAM La Gazette - 9 décembre 2019 would also help local authorities (I4CE) to highlight actions undertaken to fight against greenhouse gas emissions and even facilitate Green budgets funding through green bonds. ocal authorities will provision for local investment by LASTLY, WE MUST AVOID THE PITFALL OVER TO THE LOCAL drive the ‘green 1 billion euros in 2020 is certainly good OF INCREASING THE NUMBER OF AUTHORITIES! Some local authorities did not recovery’. They news, but it will likely not be enough. STATE SUPPORT SYSTEMS, when wait for the state to make a represent almost 70% ‘Likely’ because as yet figures do on the contrary the current system ‘green budget’ before starting to of French public not even exist on what local authorities should be simplified. Integrating work on this issue. However, the investment and have need to make the climate investments climate investment goals into existing methodological challenge of key competencies. It required! It is essential that local systems, such as the ‘Action coeur The government has and exempted to support such an exercise should not be is local authorities that, for example, are authorities quickly assess their funding de ville’ programme or the State- published the first the ecological transition. underestimated. That is why we, L environmental assessment of AMF, France Urbaine and I4CE, propelling strategies for carbon-free needs, based on the decarbonisation Regional Plan Contracts, would be the state budget. (...) This The state has made a first step. are already collaborating with transport, whether that is through trajectories that they have developed a good step forward. In the longer ‘green budget’ exercise allows But the transition to a low- five towns and urban urban public transport, new cycle over the past few years. term, it is necessary to consider environmental issues to be carbon economy that is resilient communities to develop a lanes, or charging stations for electric negotiating a ‘regional super contract’ taken into account during to climate change is first and common framework to help vehicles. It is also local authorities that IT IS ALSO WORTH REMINDING that brings together existing struc­ budget discussions. To achieve foremost a regional issue. The local authorities that want to will have to adapt urban public spaces OURSELVES THAT IT IS NOT ENOUGH tures and supplements them, with carbon neutrality by 2050, it is impacts of climate change make a green budget a reality. to future heatwaves. TO LINE UP BILLIONS OF EUROS commitments from all financiers. essential to give ourselves materialise regionally, and many This framework, which will in the in order for investments to be made the resources, including levers capable of reducing GHG first instance focus on the PROBLEM: LOCAL AUTHORITIES in the field. For projects to emerge, financial resources, to realise emissions are also regional. challenges of attenuating and MUST DEAL WITH THE SHARP decline local authorities need human our ambitions, and to reform Local authorities, with adapting to climate change, will in revenue due to the health crisis, resources to lead and organise all financial aids and taxes that jurisdiction in the three key be shared with all interested a decrease estimated for the time projects locally, to structure them. take us away from this goal. domains of transport, urban parties from the second being at 7.5 billion euros for 2020, They also need engineering and A ‘green budget’ also responds planning and housing, are trimester of 2020. while just to renovate public buildings expertise. All this requires an increase to public requests for where many structural decisions and develop public transport in dedicated operational expenditure, transparency, concerning on planning and economic Join the movement of climate infrastructures, they would need to and for the recent easing of budgetary the amounts allocated, drawn development are made, budgets for local authorities! increase investment and co-funding constraints on these expenditure by 2 billion euros. Increasing state paths to be maintained.

8 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 9 #Adaptation October 31, 2019, I4CE, Terra Nova and IDDRI organized a conference in the Senate and concluded Making the by the Minister of economic recovery Ecological transition. contribute to climate resilience

the knowledge The public authorities should take needed to act the opportunity represented by the recovery to build an economy that is is already resilient to the now unavoidable “We cannot available. ” effects of climate change. wait for a fire to break out before we build a fire station.”

VIVIAN DEPOUES PROJECT MANAGER ADAPTATION

he goals of the support programmes set up by local the rail network manager had an THE COMMON BELIEFS ABOUT ADAPTATION energy transition authorities.Above all it is essential envelope of £150M for the period (and this is to be to invest better by making adaptation 2017-2019. An earmarked budget welcomed) are very part of the drafting and steering of that helped maximise co-benefits in On October 31, 2019, I4CE, global, European and national indicators and studies much a part of public decisions. terms of adaptation. Terra Nova and Iddri scale, and even sub-nationally. undertaken, and closely discussions on organised a conference in In France, a scientific project led monitors scientific research on the Senate, sponsored by by Jean Jouzel that brings the subject for all. Each year it plans to revive the ACCORDING TO THE FIRST BUT ADAPTATION IS NOT JUST A the senatorial delegation for together various research teams publishes thematic reports, economy. But the public authorities ENVIRONMENTAL ASSESSMENT OF MATTER OF INVESTMENT. The epidemic T strategic foresight and has published five reports on submitted to the Government should also take this opportunity to THE STATE BUDGET, which the has shown that services that are concluded by the minister for the Climate in France in the 21st and Parliament, on diverse build an economy that is resilient to the government published in 2019, 7b€ invisible in normal times are on the ecological transition. On this Century, sharing regionalised subjects such as extreme impacts of climate change. of annual expenditure goes towards front lines during a crisis. Weather occasion, I4CE unveiled climate change scenarios in the weather events, the coastline, adaptation in France each year, in warning systems, public security proposals designed with Terra medium and long term. These the forest, overseas IT WILL CERTAINLY BE NECESSARY environmental and agricultural policies, and providing assistance to vulnerable Nova to strengthen measures to scenarios are available online to departments, the city and health TO INVEST A LITTLE MORE, whether regional cohesion, and research. people are all services that are and adapt France to climate change. allow actors in diverse risks. And there are many other that is to adapt coastal development, The problem about these policies is will be hugely important in the context It was an opportunity to put an industries, such as water data available. In short, we now mobility or tourist that they do not make adaptation of climate change. Public resources end to certain popular management, insurance or have the knowledge needed installations. Some of these needs, an explicit goal, which means it is are under stress, and the funds misconceptions, like “we don’t agriculture, to undertake their to take action. like adapting urban public spaces impossible to guarantee that allocated to running these services have enough data on the own vulnerability studies. to heatwaves, have already been responsibilities are clearly assigned should be ring-fenced. To paraphrase impacts of climate change to Meanwhile the national identified and their costs have been or that resources are used optimally. the virologist Peter Piot, we cannot act”. Not true. The impacts are observatory on the effects of sufficiently projected to allocate One way of ensuring this happens wait for a fire to break out before we now very well documented after global warming maintains a funding as of now. They will find their is to have budgets dedicated to build a fire station. years of scientific research on a database of current change rightful place in future investment adaptation. In the United Kingdom,

10 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 11 #Finance HOW TO INTEGRATE CLIMATE RISKS INTO REQUIREMENTS OF BANK CAPITAL

1 Green Supporting Factor (GSF) Financial regulation Brown Penalizing Factor (BPF) DIFFERENT POSSIBLE Combinaison du GSF et du BPF INSTRUMENTS Environment-Risk Weighted Asset has a role to play in Green Weighting Factor 2 ECONOMIC RISK POLICY APPROACH TWO DISTINCT Pursuiving approaches together APPROACH the ‘green recovery’ APPROACHES can create tensions !

3

KEY CHALLENGES Develop a Expand risk Ensure real Maintain capital Develop a forward-looking analysis’ impact of capital neutrality (starting common Financial regulators have numerous climate-related horizon beyond requirements point and over taxonomy for all risk measure for short term. on sectoral time). assets (green, tools at their disposal to improve how each asset. credit brown and distribution. neutral). the climate is factored into the @I4CE_ financial markets, and thus help fund “There must be debate the transition. on the opportunity of using certain financial regulation mechanisms in developed countries TENTATIVE TIMELINE FOR REGULATORY TOOLS to proactively guide the Advanced MICHEL CARDONA SENIOR ADVISOR FINANCE flow of funding.” phase: LONG TERM — Further Progress reading on phase: this topic: he priority in the with improved transparency and climate change. But this indirect MEDIUM TERM economic sector is financial market information on climate action is not necessarily enough. Rule based financial regulation; to revive economic change, through precise and mandatory There must be debate on the Initial activities, and disclosure rules. opportunity of using certain financial phase: SHORT numerous voices regulation mechanisms in developed TERM Supporting the convergence of methodologies to assess Rule based regulation of are calling to make THE SECOND GOAL IS TO IMPROVE countries to proactively guide the fiduciary duty; climate risks and to Integrating Climate-related Risks into Banks’ Capital Paris, this a ‘green reco­ THE FINANCIAL STRENGTH OF flow of funding towards specific measure alignment; March 2020 Requirements Rule based regulation on Authors : Maria Berenguer | Michel Cardona | Julie Evain very’. Given the scale of funding needs individual financial actors and the economic sectors. This third goal is disclosure; T Signaling to the financial required for the transition, it is essential stability of the financial sector as a controversial and triggers entrenched sector and increasing to supplement public funding with whole. This could happen by integrating positions. But the urgency and scale awareness on climate Rule based regulation on issues; disclosure; Integrating private funding. Yet it is obvious that climate change into management of the risks of climate change makes Integrating climaterelated Climate-related Risks risks into micro prudential Engaging a supervisory Soft regulation on fiduciary into Banks’ Capital private funding is lacking. ‘Green finance’ standards (capital requirements or this debate essential in order to regulation; Requirements dialogue to include climate responsibility; is still just a market ‘niche’. In order to risk division rules) and into the inform political decision-making. change on priority financial Supervisory review to agenda; Setting supervisory mobilise the whole finance industry supervision process (notably via Now is the time to address it for the integrate climate-related expectations; risks in ICAAP; towards the transition, underlying­ climate stress-tests), through the financial sector to fully support the Initiating research on assessing climate-related financial mechanisms must now align development of monitoring tools green recovery. Setting macroprudential risks and stress testing; stability tools to include with the demands of climate change. (climate macro stress tests), and by Soft regulation on Developing climate stress climate- related risks using macro-prudential tools (capital disclosure; testing methodologies; FINANCIAL REGULATION HAS AN buffer or limits on sector exposure). Supervisory review to What role for financial IMPORTANT ROLE TO PLAY IN THIS. integrate climate-related regulation to help Paris, June 2020 the low-carbon transition? Common actions for Financial regulators and supervisors BY PURSUING THESE TWO GOALS, Soft regulation on fiduciary risks in ICAAP; Authors: Michel Cardona | Maria Eduarda Berenguer responsibility all regulators have various instruments available THESE TOOLS INDIRECTLY HELP Adjusting macro prudential Action for proper market function which can be used to pursue three FUND THE TRANSITION because stability tools to include climate-related risks Action for financial What role for financial goals. The first goal is to ensure that financial actors can better acknowledge @I4CE_ stability regulation to help the the financial markets operate correctly, information and risks relative to low-carbon transition?

12 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 13 #Finance THE I4CE “ALIGNMENT BULLSEYE”

Low-GHG Development: Scale-down and stop non-consistent operations. Avoid locking-in emissions. Public financial Adaptation: Avoid decreasing resilience, increasing DO NO HARM vulnerability, and contributing to maladaptation. Financial Flows: Stop support of non-consistent flows institutions can whether director through intermediation.

Low-GHG Development: Contribute to the decarbonization of the entire economy and society. SUPPORT PARIS Adaptation: Contribute to increasing adaptation, resilience contribute to a ‘climate- CONSISTENT CLIMATE and adaptive capacity of investments. CO-BENEFITS Financial Flows: Foster contributions of own flows compatible’ recovery and those of partners. Low-GHG Development: Facilitate the transformation to low-GHG systems and value chains. FOSTER TRANSFORMATIVE Adaptation: Facilitate and reduce the cost of adaptation By putting the climate at the OUTCOMES actions to long-term climate change. center of public financial institutions’ Financial Flows: Support the ‘consistency’ of the broader financial system (regulation, norms, transparency). mandate, governments will help @I4CE_ them to contribute to an economic “Even in the current recovery that is compatible with context, PFIs must keep aligning their climate issues. activities with goals on — Further climate and sustainable a new -fired power plant at reading on development.” the same time. The first step of this topic: ALICE PAUTHIER RESEARCH FELLOW FINANCE AND DEVELOPMENT alignment is to do no damage across all activities.

Development banks must also ublic financial Agreement. In other words, to make to achieve goals on climate and ensure that they make best use of the public resources institutions (PFIs), sure that their activities do not damage sustainable development. The A Framework for Alignment with the : entrusted to them. What is the Why, What and How whether public the climate or actively help protect ‘Finance in Common’ summit in for Financial Institutions? point of funding another wind September 2019 Discussion Paper national or multi­ it. These commitments have led them November 2020 will be a key Ian Cochran | Alice Pauthier lateral banks, are to develop a range of tools, criteria opportunity to strengthen the mandate turbine when other private An I4CE Report in collaboration with the Climate Policy Initiative (CPI), the International Development Finance Club and with support from the European Climate Foundation. mandated with and metrics. It is on this basis that of PFIs on this. actors could do that just as supporting the they can now build a ‘green’ response Meanwhile the operational teams well? It is essential for these institutions to seek to have A framework for development of economies and to the economic crisis. within PFIs should receive a clear alignment with the P WHAT IS ALIGNMENT? ‘transformational’ impact. This is Paris agreement societies. They encourage and redirect But to do so, governments must first signal from executive management: one of the main challenges of investments using a wide range of ensure that the recovery plans they climate ambition remains a priority, aligning with the Paris financial instruments: loans, equity, are asking PFIs to implement are including in the design and payment Many public development ‘do no damage’. Over the past Agreement. It is a challenge that subventions and guarantees. themselves ‘green’. The European of funds in response to the economic banks - and a growing decades, public development should not be underestimated, Union has for example made an crisis. Lastly, and perhaps most number of private institutions banks have focused their since development banks, due PFIS ARE WELL PLACED TO HELP important step with its 750 billion importantly, PFIs must continue to - have committed to ‘aligning’ climate efforts on funding the structure of climate goals SET UP AN ECONOMIC RESPONSE euro recovery package centered share their experience with each their activities with the goals projects that are likely to limit - and notably the famous 100 TO THE CRISIS THAT IS COMPATIBLE on the green transition, with the other and engage with the commercial of the Paris Agreement. Yet, to greenhouse gas emissions, billion goal - are used to thinking WITH CLIMATE GOALS. Since 2015, European Investment Bank playing financial community through forums this day, there is no consensus such as renewable energy in terms of financing volumes an increasing number have integrated a central role. such as the Climate Action in Financial on what alignment means. installation or energy efficiency. rather than impact. climate issues into what they do. Institutions initiative or UNEP FI, I4CE’s ‘alignment target’ Funding development projects Some, especially multilateral banks GOVERNMENTS MUST ALSO, and others. These efforts are not provides a shared framework that have co-benefits for the and the members of the International INDIVIDUALLY OR COLLECTIVELY, luxuries for better times, they are that highlights the main climate is essential, but it is Development Finance Club (IDFC) make a clear signal to PFIs that they the key to success. challenges. equally important not to fund, have committed to ‘aligning’ all their have to respect - and in many cases Alignment’s first challenge is to for example, the construction of activities with the goals of the Paris strengthen - their commitments

14 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 15 #Carbon Market MAP OF GLOBAL ACCOUNTS IN 2020

Canada The European carbon federal British mechanism Columbia Quebec Northwest Territories Newfoundland market put to the and Labrador

Prince R.-U. Estonia Edwards South Ontario test by Covid Island Latvia Korea Irlande Poland N.-S. France Japon Saskatchewan New-Brunswick Chine California RGGI Saitama The crisis is an opportunity for Massachusetts the to rethink the Mexico Tokyo role of its carbon market: it is nothing Liechtenstein more and nothing less than a safety “We do not have to choose between net in the event that other policies South China’s pilot pilot ETS ETS system: New the EU ETS and other Prices given in Africa BEI : Beijing Zealand do not work. USD/tCO2e: CHO : Chongqing policies to decarbonize FUJ : Fujian Established Emissions GUA : Guangdong European electricity Trading Scheme Argentina HUB : Hubei SHA : Shanghai and industry” Established Carbon SHE : Shenzhen Tax TIA : Tianjin

CHARLOTTE VAILLES PROJECT MANAGER BUSINESS AND INDUSTRY @I4CE_ source: I4CE - Institute for Climate Economics, d’après ICAP, Banque mondiale, sources gouvernementales et informations publiques, Mai 2020

he current economic Initially presented as the cornerstone levers, such as the integration of crisis once again of European climate policy, it must carbon criteria in material markets makes obvious become a backstop for meeting or the introduction of Contracts For GLOBAL CARBON ACCOUNT IN 2020 how vulnerable climate objects in the event that the Difference for innovative low-carbon the European predicted reductions from other projects. policies prove insufficient. Explicit carbon pricing countries have introduced a comes from emissions trading systems - whether in the carbon pricing policy: Canada, markets. Revenues are mainly system (EU ETS) is WE DO NOT HAVE TO CHOOSE BETWEEN shape of a tax or the carbon South Africa and Singapore. The directed towards projects to external shocks. The crisis is THIS IS BECAUSE HISTORICALLY THE EU ETS AND OTHER POLICIES T market - are continuing to explicit carbon prices vary related to the ecological expected to have a very significant THE EU ETS HAS CONTRIBUTED TO DECARBONIZE EUROPEAN develop around the world. between 1 and over 120$ per transition, or allocated to the impact on 2020 emissions and create LITTLE TO REDUCING CARBON ELECTRICITY AND INDUSTRY. We Each year, I4CE presents an tonne of CO2. jurisdiction’s general budget. a fresh surplus of allowances, when EMISSIONS. Over the past two years, need both. And we should not overview of these public policies the surplus accumulated since 2009 in the electricity industry, it has fall back into the trap of expecting in its ‘Global carbon accounts’ Prices are still below 10$ for During the 2008 financial crisis, — Further has still not been reabsorbed. To encouraged the use of gas rather everything from the EU ETS. This reading on and infographics: the countries three-quarters of the emissions the quota-based emissions this topic: prevent another chronic fall in carbon than carbon, but to achieve climate is even more important to that have introduced these covered, despite international markets collapsed, which made prices, the parameters of the market neutrality it is not enough to ‘switch’ remember at a time when the policies, the sectors covered, scientific consensus situating these mechanisms much less of stability reserve must therefore be between fossil fuels. The industrial Commission plans to expand the price levels, revenue generated the optimal price for these an incentive for manufacturers. strengthened, which is planned for sectors covered by the EU ETS carbon market to the transport and and where it goes. The 2020 mechanisms between 40 and The current crisis will put the 2021. Another solution would be to have to date made little progress. housing sectors. This extension, if Global carbon accounts shows 80 US$/tCO2eq in 2020. safeguards introduced since establish a price floor, as exists in Decarbonization requires huge indeed it does take place, should be that as of April 1, 44 countries Carbon revenues are up slightly then to the test. other ETSs. But the crisis should more investments in low-carbon conditional on not giving up other and 31 provinces or cities have for the year, reaching about 48 widely be used to rethink the role of technologies, which was never existing policies, and even on an explicit price on carbon. billion dollars, compared to 45 the carbon market, drawing on the possible with the carbon market implementing new ones. It could These jurisdictions represent billion in 2018. Half of this example of California where the ETS alone. Worse, the existence of the otherwise slow down the transition 60% of global GDP. Three new comes from taxes and half Global Carbon has assumed the role of a safety net. EU ETS hindered the use of other of these sectors to carbon neutrality. Accounts 2020

16 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 17 #Fiscality The carbon tax 250 BUDGETARY MEASURES is not the only STATE EXPENDITURES €20bn €17bn CLIMATE- CLIMATE- solution FRIENDLY DAMAGING measures, measures, among including: which:

La Croix : Is the ecological La Croix: Most experts call for 4 MAIN SPENDING AREAS 4 MAIN SPENDING AREAS transition possible without raising the taxing carbon emissions more and carbon tax? more heavily to discourage the use of BENOÎT LEGUET : We must not oil. Isn’t the carbon tax above all make the carbon tax the be-all and politically and socially impossible 3,55% 92,87% end-all of the ecological transition. to enforce? The carbon tax is an interesting tool, B. L.: The carbon tax as we know it 5,4 5,8 0,53% 3,05% 4,1 3,5 but it is just one tool in the tool box. is above all a tax on fuels. Take the €Bn €bn €bn €bn Renewable Sustainable Aviation - Reduced Too many people, including economists, situation of someone living 30 km energy sources transportation Tax breaks and rates Climate-neutre Ambiguous direct support for road diese Raising the carbon see it as a Swiss army knife that can from their workplace, who has just tax is not one of the solve all our problems by itself. The bought a car. If the price of carbon Climat-friendly Climat-damaging carbon tax has its advantages, but was increased by raising the carbon 150 proposals made it also has problems. The good news tax, should they move home, quit 2,2 4 by the Citizens’ is that there are other solutions. their job, or scrap the car and walk 2,2 1,5 to work? The carbon tax has negative €bn €bn Research Thermal €bn €bn convention for climate. 17,3 Too often, economists who talk about effects that are hard to avoid, so I renovation 15,9 Tax exemption Tax Benoit Leguet reacts in of buildings on off-road exemption carbon pricing forget that different am not surprised that the Citizens’ diese for heavy this interview published economic sectors have vastly different convention did not select this idea. freight vehicles in La Croix. dynamics, particularly when it comes 2,8 2,9 to investment. For example, raising That is certainly not to say that 1,5 0,2 1 the carbon tax cannot send a sufficiently nothing should be done. To encourage €bn BENOIT LEGUET strong signal to justify insulating people to change their behaviour Budgetary spending Tax exemptions Operational MANAGING DIRECTEUR (€ bn) (€ bn) expenses housing. For this, the price per tonne and choose cleaner cars, it would of carbon would need to be fixed at be fairer and more effective to tax @I4CE_ a level that would be devastating for vehicle purchase rather than use, all other industries. To get a major through an expanded bonus-malus — Further insulating programme going, therefore, incentive system. We could also reading on reglementation is much more effective. reintroduce a label to tax vehicles this topic: This is precisely the path proposed based on emissions. It is when choosing 250 BUDGETARY MEASURES EXPLICATION by the Convention. a car that households can make a real choice. Afterwards, it is too late, The vote on the state budget emissions, upwards or launched several new projects they are trapped. Once again, we is a key moment for the downwards. These are 250 to make climate assessments of “To encourage people to change their see that the carbon tax is not the behaviour and choose cleaner cars, it would climate, which is why I4CE good reasons to pay attention to public budgets, with local only solution, nor necessarily the has carried out a climate the budget and look beyond the bodies and internationally. A first 360-degree climate assessment be fairer and more effective to tax vehicle of France’s State budget best, to reach our goal. assessment of the budget. It flagship measures that political October 2019

Authors : Marion Fetet | Quentin Perrier | Sébastien Postic purchase rather than use” has identified over 250 debate tends to focus on, like expenditures and tax loopholes the carbon tax. Since this study that influence France’s was published, I4CE has A first 360-degree climate assessment of France’s State budget

18 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 19 #Agriculture SG / DICOM / 19189 - Décembre 2019 HOW THE LOW CARBON LABEL WORKS @I4CE_

Let us not be STATE

Independent afraid of obligation SELECTS APPROVES CERTIFIES ACKNOWLEDGES auditor of result

1 2 3 4 Funding NATIONAL SECTORAL LOCAL EMISSION With the budget for the Common REFERENCE APPROACH PROJECT REDUCTION Agricultural Policy under stress, SYSTEM we must ensure that every euro Stakeholders spent for the environment has real “For every euro spent and experts Companies Municipalities Individuals impact on the ground. with as its stated goal, there must be a real impact on the ground.” not perfect and should THOMAS BONVILLAIN RESEARCH FELLOW AGRICULTURE AND FORESTRY continually be improved, but they are based on an expert programme’s ambition and its review process and transparent additionality requirement - conditioning specifications. ublic budgets are THE ANALYSIS CARRIED OUT BY I4CE the subvention, for example, on — Further being cut, and this is FIRST SHOWS THAT THE DISTINCTION improvement compared to an initial Carbon neutral commitments reading on especially true for BETWEEN OBLIGATION OF CONDUCT state. The efficacy of instruments and offsetting have always this topic: the Common Agri- AND OBLIGATION OF RESULT IS TOO geared towards obligation of conduct provoked considerable criticism. cultural Policy BLACK AND WHITE. Pure obligation of is criticised and flawed, but we should Some companies reduce (CAP), which is cur- result in the environmental field never not make generalisations. Funding to emissions only slightly and rely rently under reform. actually exists. Instead there is a support the conversion to organic heavily on offsetting. While such For each euro spent with sustainability continuum of more or less accurate farming, for example, is considered criticisms are legitimate, they should not be used to bring the P Will the obligation of as its stated goal, there must be estimations of results. Nor is obligation highly effective and is equivalent to an environmental results projects that are funded, and the green the CAP? real impact on the ground. The of result necessarily more costly. For obligation of conduct. A comparison of the costs and effectiveness of six instruments for Paris, labels that guarantee their June 2020 the transition to sustainable agriculture Commission plans to make this example, AECMs, based on obligation Authors : Thomas Bonvillain | Claudine Foucherot | Valentin Bellassen CARBON LABELLING AND quality, into disrepute. This happen by shifting some aid towards of conduct, are more expensive to HOWEVER, CARE SHOULD BE TAKEN COMPENSATION: DON’T GET CONFUSED! confusion would be anecdotal if obligation of result, rather than obliga- manage than carbon certification, which TO AVOID A SITUATION IN WHICH it were not so dangerous: it Will the obligation of tion of conduct, which has predomi- is based on obligation of results. The FARMERS HAVE TO CHOOSE BETWEEN environmental results could cripple efforts made over green the CAP ? nated up until now. From now on generic nature of the measure is PRIVATE AND PUBLIC FUNDING. This Not a week goes by without reductions made through these many years to ensure that every farmerswill be remunerated for their instrumental, helping to amortize set-up is a real risk, if, for example, the some company announcing it projects are certified by carbon euro that is spent in the name of efforts depending on the environmental and monitoring costs for a large number synergies between future CAP plans to become carbon labels like the Label Bas the climate - via offsetting or impact measured on the ground. of farmers. measures and carbon certification neutral. To reach this goal, it Carbone in France (developed other funding projects - actually Obligation of result is seen as a com- frameworks are not considered in commits to reducing emissions by I4CE and partners, and helps fight climate disruption. plex and costly method to implement, LASTLY, CONCERNING THE EFFICACY advance. The Commission’s wish to and ‘offsetting’ its remaining adopted by the Minister of This would give way to initiatives Domestic carbon standards in Europe

so this move raises a number of OF THE MEASURE IN TERMS OF ITS employ new measures based on emissions through funding Ecology), the Woodland Carbon of mixed quality, which are hard December 2019 Overview and perspectives

Authors : Gabriella Cevallos | Julia Grimault | Valentin Bellassen concerns. Will farmers have to install ENVIRONMENTAL IMPACT, moving obligation of result is good news. It must projects like planting trees or Code in the UK, and private to compare and do not always sensors, carry out soil analyses and towards obligation of result does not be explored, and without fear, so that managing forests or grasslands. labels Gold Standard and Verra evaluate climate impact in a therefore face skyrocketing costs for seem to be determining in itself. Two the CAP may finally rise to the climate In most cases, the emissions internationally. These labels are transparent way. Domestic carbon CAP funding? This is not the case. factors are determining however: the challenge. standards in Europe

20 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 21 #Entreprises — Further CLIMATE-RELATED SCENARIOS reading on Scenario analysis this topic:

of the issues of the IMPACT SCÉNARIOS TRANSITION SCÉNARIOS Understanding transition scenarios S Eight steps for reading and O S November 2019 interpreting these scenarios CIO TEM low-carbon transition -ECONOMIC SYS Aurore Colin | Charlotte Vailles | Romain Hubert Understanding transition scenarios

To help businesses identify and anticipate the risks and opportunities G S HG OL EM OS of the low-carbon transition, I4CE has ISSIONS AND AER Scenario analysis of the issues of the low-carbon published a practical guide to “The TCFD transition From implementation to disclosure Paris, recommends that April 2020 by companies in the TCFD framework implementing a forward-looking Authors: Charlotte Vailles | Romain Hubert | Aurore Colin businesses carry out approach: scenario analysis. CLIMATE CHANGE SCENARIOS scenario analysis for @I4CE_ Scenario analysis of strategic purposes.” the issues of the low-carbon transition

AURORE COLIN RESEARCH FELLOW TERRITORIES possible to limit global • Climate impact scenarios temperature rise to 2 or even explore the possible 1.5°C. Different low-carbon consequences of the uge changes to all Forecasting methods, and scenario HOWEVER, EVEN THOUGH SCENARIO transitions can be envisaged evolution of the climate on sectors of the analysis in particular, allow businesses ANALYSIS HAS BEEN USED FOR depending on the targeted a given system (for example economy are to face these uncertainties. They help DECADES IN STRATEGIC THINKING climate goal, the scale and the physical environment, needed for the businesses to understand how the within some businesses, their spread of efforts to reduce an ecosystem, or a human low-carbon low-carbon transition could take place widespread application to climate carbon emissions over time, system such as a town or a transition. Inter­ and how it could impact their business challenges raises difficulties. On top of by sector and by country, farm). The impacts of climate action between environment, so they can anticipate the this, further details are required on what or by the weighting given change will be determined sectors means that all businesses are risks and opportunities involved. information financial actors need, to different solutions rolled by the changes in climate H out to cut or sequester GHG but also by the evolution of concerned, and not just those in the exposing confidentiality issues. emissions. socio-economic systems, most carbon-intensive sectors. THE TASK FORCE ON CLIMATE- which will determine their Changes to their business environment­ RELATED FINANCIAL DISCLOSURES THIS IS WHY I4CE HAS PUBLISHED A • Climate change scenarios degree of exposure, their related to the low-carbon transition can (TCFD) RECOMMENDS that businesses GUIDE TO SUPPORT NON-FINANCIAL - or climate forecasts - sensitivity and their ability have major consequences on key carry out scenario analysis for strategic BUSINESSES in carrying out a scenario SCENARIO FAMILY explore the possible impacts to adapt to climate change. elements of profitability like the purposes and in order to communicate analysis of the strategic issues related of human activities on the demand for certain products or certain elements of the analysis to to the low-carbon transition. It presents Before building and using between socio-economic climate system according services, production costs, or even financial actors, which increasingly the essential steps and is accompanied scenarios, it is essential to systems and the climate: to different developments the value of their assets. want to understand the exposure of by a selection of resources (methods, know how to decipher in socio-economic systems. the businesses they finance and tools, literature). The guide also gives already-existing climate • Transition scenarios The long-term evolution of THE CHANGES THAT OUR SOCIO- their ability to implement a resilient businesses ideas on communicating scenarios. These scenarios explore the various possible the climate is conditioned ECONOMIC SYSTEMS REQUIRE ARE strategy. This means scenario analysis useful information from the scenario can be divided into three transitions to a low-carbon by current and future GHG GENERALLY UNDERSTOOD, but of the issues of the transition is both analysis to financial actors, while broad groups, each looking economy. They describe the emissions and therefore by there are uncertainties about the relevant for informing business strategy overcoming the issue of confidentiality. at a different question changes to socio-economic the uncertain evolution of our scale, pace and exact nature of the and beneficial for relationships with pertaining to the interactions systems that would make it socio-economic systems. low-carbon transition in the future. financial partners.

22 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 23 10 apr 2020 07 nov 2019 climate report Investing in climate can help Understanding transition I4CE clubs france drive its economic scenarios – eight steps for ALL recovery reading and interpreting I4CE creates spaces for dialogue: these scenarios PUBLICATIONS by: Hadrien Hainaut / Maxime Ledez / sometimes fraught with controversy but CAN BE Quentin Perrier, Phd / Benoit Leguet / by: Aurore Colin / Charlotte Vailles / Romain Hubert DOWLOADED ON: Patrice Joffron (Université Paris also - and above all - a place to share Dauphine I Psl) ______experiences and information. Like the clubs www.I4CE.fr ______04 nov 2019 on agriculture and the forest, or the Climate 11 mar 2020 climate report Action in Financial Institutions initiative. Towards an alternative Integrating climate-related approach in finance to risks into banks’ capital climate risks: taking requirements uncertainties fully into by: Maria Berenguer / Michel

account CLUBS Cardona / Julie Evain by: Vivian Depoues, Phd / Michel 19 jun 2020 ______Cardona / Morgane Nicol / Vincent climate report Bouchet (Groupe Caisse Des Dépôts) Will the obligation of 30 dec 2019 ______environmental results green the cap? Domestic carbon standards 01 oct 2019 by: Thomas Bonvillain / Claudine Foucherot / Valentin Bellassen in europe climate report by: Gabriella Cevallos / Valentin CLUB Landscape of climate finance CLUB ______Bellassen / Julia Grimault CARBON in france – 2019 edition INITIATIVE ______by: Maxime Ledez / Hadrien Hainaut AGRICULTURE 04 jun 2020 CLIMATE ACTION ______FORESTERY AND climate report 04 dec 2019

What role for financial 01 oct 2019 regulation to help the low- The proposals of 5 think carbon transition? tanks to meet the energy and climate report by: Michel Cardona / Maria climate challenge in europe A first 360-degree climate Berenguer by: Charlotte Vailles / Ian Cochran assessment of france’s state ______budget by: Marion Fetet / Quentin Perrier, Phd / Sébastien Postic 27 may 2020 29 nov 2019 ______PUBLICATIONS climate brief climate brief

Environmental and health Finance fit for paris (3fp) – 19 sep 2019 co-benefits of public action: results and scores for france climate report “it’s (also) the economy, by: Michel Cardona stupid!” ______A framework for alignment by: Patrice Joffron (Universite Paris with the paris agreement: Dauphine I Psl) / Benoit Leguet why, what and how for 28 nov 2019 ______financial institutions? climate brief by: Ian Cochran / Alice Pauthier Launched in 2015, the Climate The ‘Agriculture Climate’ Club and ‘Carbon Forest and Wood’ 14 may 2020 Key figures on climate – ______france, europe, worldwide Action in Financial Institutions Club are two places for candid exchanges between actors from climate report by: Aurore Colin Initiative is now composed of all horizons. Actors wishing to gain skills and pool their Global carbon account in ______over 50 public and private knowledge; to understand reglementary changes and the impact 2020 financial institutions around the they may have on their own sector; and to identify new forms of by: Sébastien Postic / Marion Fetet globe that would like to action and funding tools. These clubs each meet at least twice ______08 nov 2019 climate report incorporate climate challenges yearly, and I4CE also provides monitoring and analysis.

effectively into their strategy 24 apr 2020 Tracking investment into and operations. I4CE acts as climate report energy transition in germany and france: a comparison of the initiative’s scientific CLUBS KEY FIGURES methodologies and selected secretariat, to help member Scenario analysis of the results institutions learn from each issues of the low-carbon by: Julie Emmrich / Ingmar Juergens transition / Alexander Klinge / Aleksandra other, share best practices and + + by: Charlotte Vailles / Romain Hubert Novikova / Hadrien Hainaut / Ian lessons learnt, and collaborate 40 30 / Aurore Colin Cochran on subjects of shared interest. Participants at External expert ______each event interventions

24 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 25 Board Financial members transparency I4CE is a non-profit organization founded by The accounts as at 31/12/2019 have been certified the Caisse des Dépôts and the French unreservedly by our auditor, Ecovis represented by Mr. Yalep. Development Agency. These financial statements were presented and approved on the 24th of April 2019 by the Board of Directors and approved by the General Meeting on the same date.

Where do the resources come from?

FUNDING DISTRIBUTION ACCORDING TO Virginie BUDGET CHAPRON-DU JEU 48 ORGANIZATION TYPE Pierre DUCRET Secretary General of the Chair of the Board board of directors financial partners, including 7 financial – Climate Change Advisor – Director of the 16% for the Caisse Group Finances institutions, 5 local authorities, 61% des Dépôts Group Caisse des dépôts 22 companies, 8 NGOs 3 European and 7 French public bodies % 12 7%

Nathalie AUFAUVRE , 0,3% Jean-Michel BEACCO Managing Director 3 25 Treasurer of the Board – of Financial Stability million euro budget Managing Director, and Operations, Financial French public bodies Institut Louis Bachelier Banque de France institutions GOVERNANCE % 60 Companies European public core funding, to explore issues bodies Nicolas BLANC Director of the Strategy, Vincent CAUPIN of universal interest Foresight and Institutional Director of the Department Foundations, Associations and Relationships Diagnostics Economic and Federations & Executive Management Public Policies & Executive Strategy, Partnerships Management Innovation, and Communication, AFD ResearchbKnowledge, AFD

Where do the resources come from?

Mohammed HAFNAOUI Patrick JOLIVET 2019 EXPENSE DISTRIBUTION Deputy Chief Executive Deputy Head of Economics Officer, CDG Développement, and Forecasting Department, Groupe Caisse des Dépôts French Environment and Energy Permanent researcher et de Gestion Maroc Management Agency 50% Travel and other 45% project expenses Non-permanent researcher 40% Events, publications, Project support 30% functions communications

Joel PROHIN 20% The governance functions Rental, IT and % Damien NAVIZET Head of the Fixed Income of the association % 12 % other operating % 10 % 11 Head of the Climate Division, French Asset Management Division, 10 9 % expenses Development Agency Caisse des Dépôts 5% 6 External providers 2% 0%

26 — I4CE / 2019 - 2020 — — I4CE / 2019 - 2020 — 27 Thomas BONVILLAIN Malika Research fellow Pauline BOUMAZA Agriculture and BOULEZ Partnerships Forestry Office Manager Manager

Ian Michel COCHRAN Aurore CARDONA Senior Advisor COLIN Senior Advisor Finance and Research fellow Finance Investment Territories TEAM

Damien DEMAILLY Vivian Julie Strategy and DEPOUES EVAIN Communication Project Manager Research Fellow Director Adaptation Finance

Claudine Marion FOUCHEROT Amélie FETET Project Manager FRITZ Research fellow Agriculture and Head of Taxation Forestry Communication

Julia Anuschka GRIMAULT Hadrien HILKE Project Manager HAINAUT Senior Project Agriculture and Project Manager Manager - Finance Forestry investment and Investment

Romain Louise Maxime HUBERT KESSLER LEDEZ Project Manager Director of Research fellow Finance Economy Program investment

Simon MORBOIS Morgane Benoit Financial and NICOL LEGUET Administrative Director of Managing Director Director Programmes

Alice Sebastien PAUTHIER Quentin POSTIC Research Fellow PERRIER Project Manager Amélie © FritziStock - / GoodLifeStudio. Photothèque I4CE. Finance and Project Manager Carbon pricing Project development Taxation Manager Photos :

Lucile Clothilde ROGISSART TRONQUET Charlotte Project management: Research fellow - Research fellow VAILLES Agriculture and Agriculture and Project Manager Caroline Le Mignot - Food Forestry Business and industry

Damien Demailly -

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