[en] This academic study aimed at understanding the nature of the speech and knowledge produced by environmental economists about carbon social value, and at assigning them with a realistic mission in compliance with their abilities. A first part presents and discusses growth models with a carbon cycle with an increasing complexity. This part also comprises a calculation of the social discount rate and a comparison in its canonical shape. The second part reports the development of a simpler calculation method in order to overcome analysis limitations.

[en] This paper explores links between global financial imbalances and tensions around reserve currency along with climate change. Currently, risky levels of private and public debts co-exist with vast amounts of savings which 'do not know where to go.' Long-term climate-oriented financial products could enhance investors' confidence in low carbon projects (LCP) and channel to them large amounts of private savings. The paper outlines a financial architecture, the cornerstone of which is an agreement on the Social Cost of Carbon (SCC) integrated into a project's appraisal and acting as a surrogate for a carbon price. This SCC would be the value of carbon certificates issued by the government, and delivered to Banks to issue credit facilities reducing the risk-adjusted costs of LCPs. These carbon certificates could be gradually transformed into legal reserve assets of the Banks after verification of the reality of the projects. Finally, the paper considers whether such certificates would be recognized as genuine international reserve assets, backed by the rising value of carbon over time. It shows how emerging countries could then diversify their foreign exchange reserves through an asset based on the international recognition of climate as a global public good. (authors)

[en] In this paper, the authors aims at showing how France and Europe could play a key role in a new definition of the global financial framework to support transition towards a carbon-neutral world. In order to do so, they formulate seven proposals which aim at strengthening the existing French ecosystem related to finance and climate issues, at reducing financial consequences of the climate system risk, at acting on the profitability of low carbon investments, and at proposing a horizon to the European Union away from the present spectre of stagnation

[en] This paper offers a comprehensive description of the integrated assessment model (IAM) RESPONSE developed at Cired. RESPONSE aims at providing a consistent framework to appraise alternative modelling choices made by the main existing IAMs. It is designed as a flexible tool able to take different modelling structures in order to compare results from the modelling frameworks that have driven the so-called 'when flexibility' controversy since the early 1990s dealing with the optimal timing of mitigation efforts and the optimal time profile of the social cost of carbon. RESPONSE is both sufficiently compact to be easily tractable and detailed enough to be as comprehensive as possible in order to capture a wide array of emblematic modelling choices, namely the forms of the damage function (quadratic vs. sigmoid) and the abatement cost (with or without inertia), the treatment of uncertainty, and the decision framework (one-shot vs. sequential). (authors)

[en] Given the complexity of situations, negotiations face the daunting task of motivating 'sovereign' nation-states to cooperate in the fight against climate change. As game theory shows, the interest of rational countries is always to shift the weight of efforts for curbing greenhouse gas emissions onto others so as to profit from climate policies without having to bear the costs. Although it does not account for the full complexity - historical, institutional and ethical - of a country's diplomatic motives for cooperating, the theory does shed light on the conditions for the emergence of solutions based on cooperation. An agreement ultimately comes out of a compromise between economic efficiency, a participation as broad as possible among signatories, and the goals adopted for preserving the climate. Given the shift in paradigms during negotiations at Cancun and the more decentralized approach that has prevailed since then, how credible is a worldwide goal like the 2 deg. C limit set for global warming? These factors force us to reconsider the commitments that countries can reasonably make

[en] The financial and environmental crisis are usually handled in different academic, expertise and public decision networks. This separation has become untenable in the age of the Anthropocene. In fact, no ambitious climate agreement can be achieved without first finding an answer to the question of how to finance the transition towards a de-carbonized society. In this text, we further develop the reasons for which these two fields should be considered as a single unit. To this end, we go back to the fundamental difference between the price of carbon and the social value of carbon. The belief that the two can be equated through simple market mechanisms has been a failure. An external force is necessary to reduce the difference between the two. In the case of climate change, it takes the form of the IPCC's results and the political commitment to keep the temperature increase below 2 deg. C compared to its pre-industrial levels. New forms of climate policies emerge from this analysis, which now incorporate all financial actors toward this goal

[en] The objective to divide greenhouse gas emissions in France by a factor four by 2050 implies the mobilisation at the lowest cost of the whole set of known sources of reduction of emissions in all economic sectors. In this context, this report is based on a methodology (D-CAM in French for dynamics - average abatement costs, MACC in English for Medium Abatement Cost Curves) which relies on a theoretical business-as-usual scenario, on a database on the potential, rate of development, and cost of mobilizable sources, and on a dynamic model of cost minimisation. The MACC tool is used to explore, for each sector, scenarios of de-carbonation which allow objectives of reduction of greenhouse gas emissions to be reached at different time horizons. An aggregated approach of this tool modifies the distribution of efforts of emission reduction between sectors with respect to a sector-based approach. Thus, a macro-assessment of low carbon transition does not reveal any obvious over-cost with respect to the business-as-usual scenario. A second document is a Power Point presentation which contains the same information, curves and graphs

[en] After the Paris Agreement a fresh look is needed about the role of carbon pricing in climate policies. Paragraph 136 of the Decision notes its importance but only applies to 'non-party entities' and is not binding upon Parties to the Convention. Carbon prices will thus stay country-specific as one of the possible component of the INDCs to which the Paris Agreement gives a pivotal role. This is in contrast with the idea that carbon prices should represent the social costs of climate change (SCC) and be equated through all countries and sectors after adjusting for compensating transfers. Their level will be constrained by the pace at which each country can embed them into reforms of its fiscal system and its public policies. This pace will likely not be consistent with the urgency of the climate challenge and leave unsolved how to meet the Article 2 of the Paris Agreement i.e. 'making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development'. The usual response to this carbon price gap is found in complementary non-price measures. But, these measures entail the risk of political arbitrariness and economic inefficiencies. The way out is to anchor them on 'the social, economic, and environmental value of mitigation actions and their co-benefits to adaptation, health, sustainable development' (hereafter referred to as SVMA) which is recognized in the paragraph 108 of the 'Decisions 1/CP.21 Adopted of the Paris Agreement'. This notion results from a political process triggered after the Cancun's call (2010) for 'building a low carbon society - that ensures - equitable access to sustainable development'. This paper aims to clarify some basic principles about the links between the Social Cost of Carbon, the Carbon Prices and the SVMA in view of a reflection, conducted in two companion papers about the pricing schemes apt to bridge the carbon price gap and, ultimately, the 'climate finance gap'. (authors)

[en] Superseding the paradigm of a 'burden sharing' at the margin of a given development pathway to promote an 'equitable access to low carbon development' is illusory without assuming the possibility of changing the direction of development through an early shift in the direction of global savings. The obstacle does arise from global financial constraints in a world awash with liquidities. The obstacle to the massive redirection of investments arises from the gap between the carbon prices apt to trigger deep behavioral changes and those really implementable. Complementary policies are needed to compensate for this gap but at risks of political arbitrariness and economic inefficiencies. This paper explores how to create a financial devices anchored in a Social Value of Mitigation Activities (SVMA) (article 108 of the decision of the Paris Agreement) that could hedge against these risks through carbon pricing devices at a level high enough to support a self-fulfilling mechanism generating a 'new possibility space' and avoiding both a bifurcation of developing countries towards high carbon intensive pathways and a long-term lock-in of developed countries in such pathways. After reviewing the sources of the 'carbon price gap' it explains how a SVMA can be used to bridge it and allow the global convergence of carbon pricing policies. (authors)

[en] This year, Europe is confronted with a critical double challenge: addressing the climate change issue and pulling itself out of a persistent low growth trap. Today these two challenges are addressed separately. On the one hand, climate negotiations must reach a historical agreement in the Paris conference in December 2015. On the other hand, the Juncker Plan of 315 billion euros of investment, and above all the ECB announcement of a massive purchase of assets for an amount of around 1100 billion euros, must help to avoid a deflationary spiral and stimulate a new flow of investments. Regarding climate policies, public regulators have essentially focused on a carbon price, which remains today at an insufficient level to trigger the financing needs of the low carbon transition. The potential of the banking and saving channels (targets of the asset purchase program of the ECB) to scale up climate finance is however neglected. This 'Note d'analyse' proposes to make private low-carbon assets eligible for the ECB asset purchase program. The carbon impact of these assets would benefit from a public guarantee that would value their carbon externality at a level sufficient to compensate the absence of an adequate carbon price. This mechanism would immediately impact the investment decisions of private actors with a positive effect on growth. It would also strongly incite governments to progressively implement carbon pricing tools to ensure that the public backing of the value of the carbon assets remains neutral with respect to public budgets. (authors)