Adapting to climate change could lead to economic slowdown

Agents from the General Directorate of the Treasury have looked at the economic issues of the transition to carbon neutrality based on different scenarios.

France has set itself the objective of reducing its gross greenhouse gas emissions by 50% by 2030 compared to 1990, and aims to significantly reduce the share of fossil fuels in its final consumption by 2030.

And "the transition which is carried out in an orderly and coordinated manner would represent an economic cost (...) which would remain moderate and transitory", indicated Nathalie Georges, head of the macroeconomic policies and European affairs department at the General Directorate of the Treasury.

The authors of the report note that an increase in carbon pricing and the costs associated with greenhouse gas emissions - through carbon taxation, subsidies or regulations - could lead to a double negative shock, in demand for households and in supply for businesses.

This could result in a drop in the level of activity which could cost France a little less than one point of GDP in 2030 (-0,9 in 2030), compared to a scenario without additional decarbonisation measures.

The loss would be partially absorbed from 2040 and France could reach "-0,6 points of GDP in 2050", detailed Nathalie Georges.

Decarbonization will require significant private and public investments that could reach 110 billion euros in 2030 in France, we can read in the document from the General Directorate of the Treasury, "and will depend beyond this horizon on the evolution of technologies."

But these costs are "much lower than the costs of climate change damage," notes Nathalie Georges. According to an estimate by the central bank network, inaction could cost "around 6 points of GDP for France and the European Union," and "9 points of GDP globally" in 2050, she said.