While the health crisis has meant the climate issue is taking a back seat, it has also shown that the European Union is able to put in place radically new measures. What measures would prevent the economic recovery from leading to an increase in CO2 emissions, as it did in 2009?
In view of the three financial, European and health crises, it is time for Europeans to change their climate policy software. Instead of pursuing a target in terms of quantity, such as a 40% reduction in emissions by 2030, the Union should set itself a target in terms of carbon price. A price starting at €50 per tonne of CO2, rising by 6% per year for the next 10 years, then 4% per year beyond that, seems desirable to me.
The massive fluctuations in the carbon price on the EU-ETS market are not good. Industrialists need predictability of future carbon prices to plan their energy transition, even if perfect predictability is impossible given the consequent uncertainties surrounding the modalities of the transition. For the time being, I support a proposal to tinker with the EU-ETS by adding a floor price of €30 per tonne of CO2. This would create a hybrid system combining an emissions reduction target with an objective of internalising the value of climate damage.
Last December, the European Commission presented a New Green Pact, designed as a growth strategy for a low-carbon Europe. How can we integrate the CO2 emissions reduction goal initially set out in the Green Deal in the economic recovery plans that will follow in the wake of the crisis?
Once the health crisis has passed, we must accept that the European climate policy needs a re-think. The Green Deal that was being developed before the pandemic is likely doomed. The significant increase in sovereign debt in the Union and the rest of the world will constrain public spending for years to come. The financial capacity of states to subsidise a transition is thus weakened. This type of action would be limited to financing public infrastructure necessary to the coordination of private action, households and businesses. We have to be honest and recognize public support for private transition efforts is forfeited.