northOur world is fragile. It is affected by violent crises such as wars, but also by structural transformations such as climate change. It is our house that becomes uninhabitable. The human community must strive to restore order and repair it. In this perspective, economics – from ancient Greek oikos, “ house”, and nomos“law” – must be on the front line to help us manage our common habitat, the planet.
Climate change is an existential threat: the 2017 report of the Intergovernmental Panel on Climate Change predicted that between 4 billion and 5 billion people would live in climate conditions beyond the lethal threshold by the end of the century, if inaction. To achieve a temperature rise limited to 1.5°C, we had a “carbon budget” of 300 gigatonnes (Gt) at the beginning of 2020. Since then, it has been reduced dramatically, as we have spent more than 36 Gt per year , since Frédéric Samama shows in Archeology of inaction (Hermann, 200 pages, 18 euros). Our budget is now 155 Gt of CO2. There is an emergency.
Economics has a lot to say in helping shape our climate policies. Since markets are unable to take into account the harmful effects of CO emissions on their own2It is necessary to impose taxes that lead to a high and increasing carbon price, thus altering the incentives of all economic actors and directing technological changes towards decarbonization. This carbon price must be applied globally to prevent “leakage” of polluting industries that establish themselves in more lenient jurisdictions.
Change our priorities
But between the prescriptions of economic theory and reality there is an enormous gap. The concrete implementation of the theory must be meticulously thought out: the European Union is at the forefront with its carbon emissions rights system and we can be happy about that. But the redistributive aspects of carbon taxes and supporting the poorest households during the energy transition are essential. The episode of the “yellow vests” in France is emblematic from this point of view. We can also cite the American Inflation Reduction Act of 2022, which approves green subsidies under the pretext of fighting inflation due to the hostility of the US Congress to promote the transition. Furthermore, Europe, responsible for less than 8% of current global emissions, cannot achieve anything on its own. We must create international cooperation and a mechanism for harmonizing carbon prices at borders to avoid any environmental “dumping.”
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