TASK FORCE Carbon Pricing in Europe

02.11.2021 2 min
On February 6, the Task Force for Carbon Pricing in Europe created by Edmond Alphandery was presented.
portrait Olivier Klein

I had the pleasure and the honor to introduce this webinar, the opportunity to recall our convictions and our strategy to leave a low carbon world to future generations :

« I am honored to introduce the topic of our meeting today.

Thank you, dear Edmond.

Of course, now, everybody is conscious of the real, huge and present danger of carbon emissions for the planet and of the urgency of the energy transition.

It is an usual issue in economics, by the way, because air is a common good. And non private goods, common goods, are always complex issues to deal with. The question is :  who is responsible for these common goods ?

  • As far as individuals are concerned, having a free rider attitude is always a human inclination.
  • As far as Nations are concerned, they can ask themselves how accountant are they, as a Nation, for global warming. They could easily expect other Nations to bear the costs of decreasing carbon emissions, leaving the others to do the job. And we should stress that some countries, and not the smallest, play or played this game.

To help the situation, we can think of several solutions :

  1. Norms : legal constraints.

Yes, but it is not obvious to establish these norms because a lot of them can be in effect inefficient, or even sometimes counterproductive. And they have to be simultaneously established in a lot of countries, because if some important countries are not on board, the efforts won’t be successful and there won’t be fair competition.

  1.  The same with subsidies.
  2. Public opinion, may be part of the solution, reinforced by name and shame. Though, with the risk of focusing on false solutions,  politically correct but sometimes of poor or nil efficiency.
  3. Carbon Price :

It’s now a consensus among the economists that it is the best approach. Because it is the only holistic method to influence individuals as well as corporates behavior. On top of that, this solution preserves entrepreneurial and consumer freedom.

Though, it is still complex to be implemented : price setting is still an issue. Should there be a market for emission rights ? Should there be a carbon tax ?

And there are some other pregnant issues :

  1. The difficulties for those who have to bear the brunt of the consequential increase in carbon price and its impact on their purchasing power (the “Gilets Jaunes” effect).

So, what system of compensation should be implemented, if any ?

  • There are still diverging interests among Nations :
    • between rich and poor Nations
    • between industrialized and less industrialized
  • As far as Europe is concerned, a carbon price increase should go hand in hand with taxes at the European Union boarders, to avoid seriously disadvantaging the EU.

But, is it possible for the 27 countries to agree on this point ?

Conclusion :

This is the reason our task force dedicated to the carbon pricing solution has been created by Edmond Alphandery.

In order to foster the spread of this idea and to push forward possible solutions to these crucial issues, in Europe and across the Globe.

That is why Bred, AXA and Meridiam decided to support the task force on carbon pricing in Europe. »

CEO of BRED and Professor of Financial Macroeconomics and of Monetary Policy at HEC Business

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