Technology optimism is not enoughSome considerations on the difficulty of triggering
low-carbon transition in France

Jean-Charles Hourcade, Ruben Bibas
Presented by Julien Lefèvre
CIRED
AIM International Workshop
9 December 20161

Photo : Mairie Paris

Question: How can one trigger transition
towards factor 4 by 2050 in France?

2Not doing anything is not an option

Policies are needed!

Reference-33% CO2 emissions in 2050 relative to 1990
(analysis using IMACLIM-R France)

A set of ‘consensus’ policies &measures still insufficient for factor 4

EncilowCarb PM

Including:• Energy efficiencynorms in newbuildings• Financial incentives
for energy efficiency
renovation• Eco-taxes on trucks
and kerosene

Reference=> -61% CO2 emissions in 2050 relative to 1990

Despite ‘engineer optimism’,a transition cost
REF
PM20102015
0.77
0.73

20102020
0.83
0.9

20202030
1.09
1.3220302040
1.47
1.4620402050
0.85
0.920102050
1.06
1.15

GDP mean annual growth rate (%)

PM2015 2020 2030 2040 2050-226183 254 307

Employment variation relative to BAU (1000s full-time jobs)
Computed with IMACLIM R France PM have positive macroeconomicimplications in the long-run
 Time-lags between expenditures andbenefits create short-term loss

P&M + carbon tax improve
environmental performance
Quinet report carbon tax:
• 32€/tCO2 in 2012
• 100€/tCO2 in 2030
• 300€/tCO2 in 2050
Carbon tax
EncilowCarb PM

Revenue recycling:• ½ labor tax cuts
• ½ ‘green checks’ tohouseholds

Reference=> -68% CO2 emissions in 2050 relative to 1990

But transition costs persist
REFPM
PM + T

2010-2015 2010-2020 2040-2050 2010-2050
0.77
0.83
0.85
1.06
0.73
0.90
0.90
1.15
0.69
0.860.87
1.09
GDP mean annual growth rate (%)

PM
PM + T2015 2020 2030
-226
183
25166

2040
254
174

2050
307
202

Employment variation relative to REF (1000s full-time jobs)

 PM+T underperforms PM• Economy-wide propagation of energy costs notcompensated by lower labor taxes given recycling rule andtime profile of carbon tax

P&M + carbon tax + negotiation do not
improve environmental performance

Carbon tax + negotiation
EncilowCarb PM
Reference

Share tax revenue between
labor tax reduction andgreen checks to balance:• Competitiveness risk oflow reduction in labortax• Demand risk of low
redistribution towards
households=> -68% CO2 emissions in 2050 relative to 1990

Now transition costs disappear
REF
PM
PM+T
PM+T+N

2010-2015 2010-2020 2040-2050 2010-2050
0.77
0.83
0.85
1.06
0.73
0.90
0.90
1.15
0.69
0.86
0.87
1.09
0.81
0.96
0.88
1.14
GDP mean annual growth rate (%)

2015 2020 2030
PM-226
183
PM+T
25166
PM+T+N 362040
2541742050307202628

Employment variation relative to REF (1000s full-time jobs)

 This result is not tax carbon specific..
• … But the carbon tax provides degree of freedom for social
negotiation through wider tax baseAdding financial device overshootsfactor 4
Financial tool, signal
credibility
Carbon tax + negotiation

Financing device lowers
investment risk in lowcarbon projects
 modeled as lower
discount rate

EncilowCarb PM
Reference

Increased credibility ofcarbon signal
 modeled as ‘less myopic’decisions=> -85% CO2 emissions in 2050 relative to 1990

While transition cost do not reappear
2010-2015 2010-2020 2040-2050 2010-2050
REF
0.77
0.83
0.85
1.06
PM0.730.90
0.90
1.15
PM+T
0.69
0.86
0.87
1.09
PM+T+N
0.81
0.96
0.88
1.14
GDP mean annual(%)
PM+T+N+F
0.77
0.9growth rate 0.94
1.2
GDP mean annual growth rate (%)

 Complementarity between financial device and carbon
tax:• Lower carbon tax (50€/tCO2 instead of 300€ in 2050) yields
Factor 4 and improves growth However, this result assumes political, social andtechnical capacity to enforce a diverse set ofmeasures

Conclusion
Question: How can one trigger transition
towards factor 4 by 2050 in France?
A heuristic tale suggests that …
… technology is not enough and deep
decarbonisation is possible only if embedded in a
broader social contract, including: sectoral policies
 carbon fiscal reform labor markets and labor regulations
 financial intermediation

Thank you

www.centre-cired.fr

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Photo : Mairie ParisReferences Bibas, Ruben, Jean-Charles Hourcade. 2013. Transitionsénergétiques en France : enseignements d’exercices deprospective. Contribution au débat national sur latransition énergétique. CIRED working paper n°51.
http://www.centre-cired.fr/spip.php?article1564
 Encilowcarb Project: http://www.centrecired.fr/spip.php?article996&lang=en
 Mathy, Sandrine, Meike Fink, and Ruben Bibas. 2014
“Rethinking the Role of Scenarios : Participatory Scriptingof Low-Carbon Scenarios for France.” Energy Policy
77:176–90. http://dx.doi.org/10.1016/j.enpol.2014.11.002
 http://www.imaclim.centre-cired.fr/IMG/pdf/20120117CIRED-BibasMathyHourcadecommissionEnergie2050.pdf

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Appendix: Finance is needed in an uncertainworld