Since then, we have focused our economic analysis on public policies with an emphasis on assessing the investment needs and policy options for the transition. Our ambition has been to advance the public debate on climate with facts and figures, promoting long-term investment plans as an essential tool to turn political ambitions into reality. Over the years, we have applied this approach to a growing number of policy areas and expanded our geographical scope from France to Europe and internationally.

We mark our first decade in a geo-political context that has changed dramatically since 2015. The impact on the ambition for and progress on the climate transition is clear. At the same time, the devastating effects of climate change are increasingly present. In challenging times, it is even more necessary to continue to inform the public debate about what climate transition means for people, business and different sectors. It is equally necessary to shed light on the conditions to achieve the transition, including the public policy mix and investments.  

Over the past 10 years, we have continuously reinforced our expertise, aiming to increase the policy relevance of our work, making data and analysis available to inform policy choices. We have developed collaborations across all levels of governance, established a solid network of like-minded organisations and grown trust in our relationships with decision-makers. We have taken note of the impact of our flagship initiatives on the public debate, including on climate investment needs and the costs of adaptation.  

It is on this strong basis that we remain fully committed to shaping the pathways for investments in climate transition ahead. Thanks to all our partners and our growing readership here for the interest and support.

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10 years in 2 minutes

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If you would like to learn more about the work of I4CE, we are delighted to share videos from our partners recorded on the occasion of our 10th anniversary: 

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L’article A decade of commitment to advancing economic policies for the climate est apparu en premier sur I4CE.

Meeting the EU’s 2030 climate targets requires an investment of €842 billion annually across the European economy. I4CE’s flagship report, The State of Europe’s Climate Investment, finds that we are far off that pace, with a current investment gap of €344 billion. Similarly, the European Climate Neutral Observatory (ECNO) concludes in its 2025 report that more effort is needed on the essential enabling conditions for the climate transition, especially finance. 

With a redesigned architecture of the MFF, the Commission sends a clear message of moving beyond “business-as-usual”. The proposed National and Regional Partnership Plans (NRPPs) will require Member States to develop reform and investment plans, aligning with the National Energy and Climate Plans (NECPs). This points towards an increased emphasis on joining up policy ambition with investment needs assessment and plans. 

The highly anticipated new Competitiveness Fund offers a much-needed simplification of the EU funding landscape. Still, beyond research and a few promising instruments, the Fund’s size remains limited relative to its ambitions. Europe’s weakening position in cleantech manufacturing and the need to accelerate industrial decarbonisation demand more. 

As Member States and EU institutions head into lengthy negotiations on the MFF, Europe’s climate investment needs will likely continue to grow. If the EU budget cannot act as an investment shock in itself, it can still serve as the tip of the spear – guiding national and private investment toward sectors critical for the clean transition. Whether it can live up to this potential now depends on the Member States. 

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L’article 2030 and Beyond: Budgeting Europe’s Climate Transition est apparu en premier sur I4CE.

Meeting the EU’s 2030 climate targets requires an investment of €842 billion annually across the European economy. I4CE’s flagship report, The State of Europe’s Climate Investment, finds that we are far off that pace – and these latest EU budget proposals do not demonstrate a clear commitment to targeting public money to catch up.

Not much bigger – but better?

While the €2 trillion headline figure might sound significant – and is being pitched by the Commission leadership as transformational – the reality is that it does not represent a major increase in the size of the budget compared to the current period. The new size corresponds to 1.26% of EU Gross National Income (GNI), a modest rise over the current level of 1.12%. With much of the additional funds going to pay back the loans taken to hamper the impact of the Covid crisis, the actual increase is closer to 0.02% of GNI – sure to be contested in negotiations with Member States.

So, the next budget does not look significantly larger. And with the end of the NextGenerationEU programme in 2026, the EU’s resources to support its growing number of objectives – including the climate transition – look tight. But if the next MFF cannot do more with more, can it, through changes to its structure, do better with less?

National and Regional Plans – towards long-term climate investments?

The European Commission’s proposal for the next EU budget includes merging several existing funds – including the CAP and the Cohesion Fund – into a single instrument: the National and Regional Partnership Plans (NRP plans). This consolidated fund will be divided into 27 national envelopes.

To access this funding, Member States must develop reform and investment plans, addressing also the EU climate targets. The draft regulation requires Member States to dedicate a specific percentage of their NRP envelope to climate and environmental objectives, while the Commission can set the minimum percentage, based on each country’s progress and projected trajectory.

Member States are also expected to explain how these plans align with the National Energy and Climate Plans (NECPs). A recent assessment by the European Commission indicates that full implementation of the NECPs could enable the EU to meet its 2030 targets. Still, current plans often fall short of analysing actual investment needs and lack comprehensive strategies to mobilise both public and private financing.

To ensure that part of the EU budget envelope is effectively directed toward climate investments, the NECPs should develop into robust climate investment plans. These should not only detail public budget allocations but also outline policies to stimulate private investment – through fiscal incentives, risk mitigation, and regulation. By linking the NRP plans to the NECPs, EU fund allocation could be made conditional on Member States efforts to close the investment gap.

Ensuring that these plans are sufficiently robust, and that EU funds are effectively used, will require both building capacity in Member States and strengthened bottom-up scrutiny. National think tanks and research institutions can play a key role in supporting this effort by providing technical expertise and policy guidance. In France, for example, I4CE supports public authorities estimating climate investment gaps and advising on funding options, leading to a first multiannual climate financing strategy in France in 2024. Extending this capacity in other Member States would create a common framework for analysing and governing investment plans – reducing fragmentation and offering EU policy makers a solid basis to assess how effectively budgets support EU climate goals.

The European Competitiveness Fund – limited funds demand strategic targeting

After months of anticipation, there is much to welcome in the Commission’s proposal for a Competitiveness Fund. The consolidation of several smaller EU funds promises to simplify the complex EU funding landscape. The launch of new bottom-up calls such as “EU Tech Frontrunners” (to support areas where the EU could build lasting competitive advantage) and “Single Market Value Chains Builder” (focused on onshoring strategic value chains) reflects a more strategic industrial policy approach.

The Commission also proposes a doubling of the allocation to Horizon Europe, to €175 billion –an overdue boost to the chronically oversubscribed research programme. However, integrating Horizon into the Competitiveness Fund remains contentious. The compromise – where Horizon remains a self-standing programme, but €68.2 billion in collaborative research funding will be managed by the Fund and aligned with its priorities, including €25.3 billion for the clean transition – raises questions around implementation and governance, with responsibility for the Competitiveness Fund spread between the Commission’s Research (RTD) and Industry (GROW) Directorates.

Still, beyond research and a few promising instruments, the Fund’s size remains limited relative to its ambitions. Europe’s weakening position in cleantech manufacturing and the need to accelerate industrial decarbonisation demand more. With just €26 billion dedicated to mature, capital-intensive projects – and a wide scope spanning e-fuels to nature-based business models – the resources will be stretched thin. By comparison, the Innovation Fund alone offers around €4 billion annually for a narrower scope of technologies.

Despite recent calls for a robust green industrial policy, future green industrialisation cannot rely solely on the EU budget. Leveraging national resources – through as-a-service mechanisms, state aid flexibilities, InvestEU, or carbon market revenues – will be critical.

Given scarce resources, it is striking that the Commission’s proposal says little about strategic prioritisation of sectors. The Competitiveness Coordination Tool could help align Member State and EU investments toward high-value sectors, but it is barely mentioned. The Competitiveness Coordination Tool is potentially the vehicle to implement a more ambitious governance framework of green industrial policy at EU level, with a data-driven prioritisation of sectors and closer alignment of national policies to develop a strategy that is able to compete with the largest economies globally.

The budget battle is just beginning

This proposal is only the starting point for what promises to be a long road to compromise. The Council’s political position at the end of this year will be the first indicator of how difficult the debate may become.

While Member States negotiate the details, Europe’s climate investment needs will likely continue to grow. The EU budget has an important signalling role – linking investments to NECPs and targeting funds to strategic green sectors – but the bulk of responsibility lies with national budgets and the private sector.

The MFF proposal sends a clear message: the EU wants to move beyond “business-as-usual,” but lacks the resources to do so at scale. Nevertheless, the design of the new architecture matters. If the EU budget cannot act as an investment shock in itself, it can still serve as the tip of the spear – guiding national and private investment toward sectors critical for the clean transition. Whether it lives up to this potential now depends on the Member States.

L’article Can the next EU budget point the way to an investment plan for climate transition? est apparu en premier sur I4CE.

With the dust settling from COP29’s hard-fought negotiations on the New Collective Quantified Goal (NCQG), attention is shifting to how the climate finance goal will be met. The challenge is how to scale up financing for increasingly connected priorities in a challenging landscape of debt stress and cuts in official development assistance.

The recent Financing for Development (FfD4) conference in Seville offers important clues about how to continue the political momentum on the road to COP30 in Belém. It is the first time that the FfD process has meaningfully connected to relevant UNFCCC decisions. FfD4’s outcome document, the Seville Commitment, goes beyond the previous FfD outcome (the Addis Ababa Action Agenda) to meaningfully integrate climate finance within the broader development finance framework rather than treating it as a separate track. While the Addis Ababa Action Agenda acknowledged existing climate finance commitments (the $100 billion goal), the Seville Commitment actively calls for resources for implementation. This marks a significant evolution.

Here are the five things that FfD4 achieved for climate finance:

Calling for resources for the implementation of UNFCCC decisions

The Seville Commitment features several connections to the multilateral processes for climate, biodiversity and desertification. More specifically for climate finance, it calls for ‘the provision and mobilisation of means of implementation in line with the objectives and respective commitments under the UNFCCC and Paris Agreement’. This includes the contentious NCQG decision (see ODI’s thoughts here) and the UNFCCC-linked multilateral climate funds.

This language matters. By setting the climate finance goal within the broader financing for development framework, the Commitment signals recognition that providing and mobilising financial resources to at least $300 billion by 2035 – and the scaling up to $1.3 trillion from all sources – will be linked to the discussions on international financial architecture reform and increasing mobilisation of private finance for sustainable development.

Supporting the implementation of NDCs and NAPs

The outcome document also calls for ‘support for the implementation of nationally determined contributions and national adaptation plans.’ Countries’ updated nationally determined contributions (NDCs), or NDCs 3.0, are due this year, and are expected to be more ambitious than the previous round, as prescribed in the Paris Agreement’s ratchet mechanism. The UNFCCC’s Standing Committee on Finance has previously estimated that developing countries’ needs in NDCs amount to US$455–584 billion per year by 2030. With NDCs 3.0 rolling in, it is possible that the estimated costs will be higher. There is a well-documented gap especially for adaptation finance needs, estimated at US$187-359 billion each year, which informed the Doubling of Adaptation Finance pledge made at COP21 that will expire this year.

Supporting the implementation of NDCs and NAPs will require substantial finance beyond the $300 billion goal of the NCQG. To meet developing countries’ needs, there is a need for coherent financing strategies that use scarce concessional resources well but also seek to boost domestic resource mobilisation and enable climate-smart private investment.

‘Looking forward’ to the launch of the Baku to Belém Roadmap by COP30

In pursuit of the ‘scaling up’ to $1.3 trillion, the COP29 and COP30 Presidencies are developing the Baku to Belém Roadmap and report as mandated in Baku. As Brazil’s COP30 Presidency has outlined to its Circle of Finance Ministers, five priority areas will shape the report expected by COP30 in Belém: MDB reform, expanding concessional finance and climate funds, country platforms to boost domestic capacity, innovative financial instruments for private capital mobilisation and strengthening regulatory frameworks.

These areas of focus are a welcome effort to address some of the key topics that shaped the NCQG deliberations. Some of these include the role of public finance: whether it should be used to de-risk and mobilise greater private investment to steer the real economy versus providing grants and highly concessional resources for climate actions with public good characteristics or less certain, monetisable returns, e.g., for adaptation. Navigating fiscal constraints in both developed and developing countries will be critical to scaling up finance for climate.

Stressing the importance of transparency in climate finance reporting

The Seville Commitment’s emphasis on transparency in climate finance reporting echoes the transparency arrangements featured in the NCQG decision. Starting in 2028, countries will produce biennial reports on collective progress, including specific reporting on enhancing access, the regional balance of climate finance and the impacts, results and outcomes of climate finance flows. The outcome document’s recognition of the importance of transparency demonstrates sustained momentum to track not just the quantity but the quality of finance flows.

However, progress on this front will depend on what information can be collected for reporting on a wide range of sources of finance. The broad formulation of the scaling up to $1.3 trillion in the NCQG from ‘all public and private sources’ raises a relevant question of how ‘all’ private finance (mobilised, catalysed, etc.) flows might be counted. Capturing private finance flows has long been a challenge, including managing confidentiality aspects and approaches to make this information consistent (i.e. measuring the same thing), standardised (i.e. to the same unit, including time unit) and aggregated for assessment.

The road to Belém

By acknowledging wider challenges – from high costs of capital to unsustainable debt levels – the Seville Commitment reflects a growing political awareness of the structural reforms needed to respond to the climate and biodiversity emergencies. How to get to the trillions needed will require coordination at several levels.

The scale of the needs required gives us a sense of the challenge ahead, but current figures have limited practical use for supporting the mobilisation of finance at country level. Estimates must go beyond abstract investment needs and incorporate cost of capital considerations, ultimately moving towards detailed investment plans and sophisticated financing strategies to match different sources and instruments. These should be designed in ways that minimise costs and acknowledge respective constraints for both public and private actors.

How countries translate the Seville Commitment into action will vary based on national circumstances. Success requires policy frameworks that send clear, reliable signals to financial market participants – signals that promote financial resource mobilisation. Countries can design policy packages tailored to their specific needs and priorities, drawing from tools across fiscal policy, financial regulation and both monetary and non-monetary measures. By taking into account a joined-up perspective of their financing needs, national policies and sustainable development objectives, countries can reduce uncertainty for investors and strengthen efforts to attract and deploy sustainable finance.

Just four months remain until the next COP. The road to COP30 and the delivery of the ‘Baku to Belém Roadmap to 1.3T’ will depend on whether the recognition of climate in the broader development framework leads to enhanced coordination or adds another layer of complexity to an already challenging landscape.

L’article What’s next for climate finance? From Seville to Belém est apparu en premier sur I4CE.

The first issue concerns financing needs estimates in Emerging Markets and Developing Economies (EMDEs). Our report below questions whether headline figures on climate financing needs in EMDEs – useful to raise ambition in global commitments – can also drive actual finance mobilisation. These estimates can vary by a factor of five, due to incomplete underlying data and different methodological choices. They often mix two approaches: one based on incremental climate action costs to attract new finance, the other on broader, climate-aligned development needs to steer systemic shifts in finance flows. Crucially, most studies ignore borrowing costs, despite the real challenges posed by debt crises and capital costs in EMDEs. Yet the real costs of capital will vary depending on the mix of instruments and sources deployed. The omission of these costs from the high-level estimates shows that there is still a long way to go before achieving the COP targets through effective mobilisation strategies.

The second issue concerns the role of public development banks (PDBs). As highlighted in the “Seville Commitment”, international PDBs face high expectations for leveraging SDG-oriented finance and aligning existing finance flows with climate and development objectives. Our recent publication examines how PDBs providing international development finance can support Paris alignment of financial flows entrusted to financial intermediaries (FIs). This research compares practices for engaging with FIs and makes recommendations for how this engagement can maximise climate and development outcomes. 

As international attention moves towards the implementation of climate ambition, these publications contribute to an essential understanding of financing needs and mobilisation strategies.   

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L’article Bridging the gap: high-level climate & development finance commitments and the reality on the ground est apparu en premier sur I4CE.

COP 29 ended last year with a New Collective Quantified Goal (NCQG) –revised climate finance target to replace the USD 100 billion goal. The NCQG decision put forward a commitment by developed countries to lead in providing USD 300 billion per year by 2035 for developing countries, as well as a proposal to work on a roadmap to scale up climate finance for developing countries to reach a level closer to the estimated needs –the ‘Baku to Belem Roadmap to 1.3T’ (USD 1.3 trillion). The latter must be delivered at the end of the year at COP 30, and strong efforts are being put in the task by the Brazilian Presidency.

Yet the current global economic and geopolitical context has led to an increasingly complex landscape for international climate and development finance. Cuts in Official Development Aid (ODA) and climate finance have spread since the new Trump administration took office in the United States, as part of a part of a broader rollback of climate and development aid policies. In Europe, a growing focus on competitiveness and security, combined with fiscal constraints in several countries, is already having an impact on EU climate investments. While emerging and developing countries are confronted with increasingly limited fiscal space and debt burden that hinder their ability to invest on climate and development goals.

In this challenging landscape, exploring diverse policy tools to mobilize and align financial flows is more crucial than ever. Carbon pricing instruments and their revenues are part of the tools available that can help with this task. The 2025 edition of the Global Carbon Accounts, launched this week in the context of the Innovate4Climate 2025 in Sevilla, provides insights into both current and untapped potential for carbon pricing revenues to support a range of policy goals. USD 103 billion in revenues collected in 2024, 56% of revenues used for environment and development objectives, and at least USD 75 billion in revenue forgone… These are some of the key figures you will discover when reading the new edition of I4CE‘s Global Carbon Accounts.

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L’article The unlocked potential of carbon revenues to help fill the climate finance gap est apparu en premier sur I4CE.

Is Europe on track to deliver on its 2030 targets? With the second edition of our State of Europe’s Climate Investment, we take the temperature on investment in the climate transition in the European economy. While some progress has been made, investment in the energy, transport, buildings and cleantech manufacturing sectors continues to fall short. In 2023, climate investments in the EU reached 498 billion euros, well below the 842 billion euros needed on average each year to meet the 2030 EU climate targets, leaving a 344 billion euros gap.

And it is likely to get worse before it gets better. Early projections for 2024 suggest that investment in key sectors like wind power, buildings renovation, and electric vehicles are at risk of decline. Cleantech manufacturing investments are gaining ground, but production of EU cleantech facilities is falling short of demand, putting many of these assets at risk. Climate policy without sufficient investment will not deliver, and delaying action will make cost rise. The EU needs a better investment strategy.

The upcoming negotiations on the next EU multiannual financial framework (MFF) as a critical strategic investment budget offer an opportunity to move towards a long-term financing strategy for climate investments, providing predictability to private economic actors. Also, the National Energy and Climate Plans (NECPs) have potential to develop into genuine investment plans at the national level. They are gaining traction with the recent assessment by the European Commission that alignment with the 2030 targets is possible, if the plans are fully implemented. Our report aims to inform these public debates, reinforcing the evidence base with an independent analysis on the state of play on Europe’s climate investment.

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L’article Halfway to 2030, the EU needs a climate investment boost est apparu en premier sur I4CE.

According to a study by I4CE, local authorities in France need to double their investments in decarbonization by 2030 – without taking into account future adaptation costs. This significant effort will be critical for achieving carbon neutrality in France by 2050. 

With public investment on a tight rope in large parts of Europe, doubling investment for the climate transition is no small challenge. In response to this, I4CE, in collaboration with a group of cities and metropolitan authorities in France, have developed a new tool for local decision-makers: a method to elaborate a “climate-aligned financing plan” tailor-made to their city. But what does that mean in practice? 

Driving local climate action through investment planning 

A climate governance tool: aligning investments with climate objectives 

Any local authority that has adopted a climate strategy has also set local emission reduction targets. Achieving these quantitative targets, requires matching them with financial resources and embedding them in a clear, long-term investment trajectory. Integrating the necessary climate investment into a multiannual strategy provides an overview of financing needs and how to address those.   

When climate investments are integrated into existing local investment plans, local governments  have already taken the first steps to ensure that investments are allocated according to its decarbonization trajectory and that all departments of the city administration are engaged in achieving the objectives.  

A financial steering tool: ensuring a match between climate and financial trajectories 

One key challenge is making sure the trajectory of the financing plan is aligned with that of the climate plan. The “climate-aligned financing plan” provides a method for mobilising all available financial levers across a local government and building a shared framework for investment.  

Beyond optimizing traditional funding sources—grants, taxes, debt—local authorities can explore innovative tools like the “green budget”. This approach assesses the climate impact of investments by identifying “green” or “brown” expenditures, which helps redirect or rebalance planned spending where needed. 

Having a clear view of the investment effort required for the climate transition also strengthens dialogue with financial partners. A well-structured investment plan gives credibility to access grants, loans, or co-financing by improving financial visibility and reinforcing long-term commitment. 

3 Key Steps to Build a Climate-Aligned Investment Plan 

1) Develop a quantified, sector-specific climate strategy 

Break down your climate targets by sector and translate them into tangible targets or “physical trajectory”. For example, reducing GHG emissions from public buildings by X% could mean retrofitting Y square meters. 

2) Translate those targets into investment needs 

Once the targets are set, estimate the investments needed. To do so, define a “unit cost” per climate action (e.g., €/m² for building retrofits) and calculate the total climate investment needed (e.g. Y m² × €/m²). 

3) Embed these financial needs into the investment plan 

This means 2 things: converting investment needs into operational projects across line departments and identifying all available financing options to support them. 

A tool for all local governments across Europe   

This methodology will be available by the end of June. While this method is tailored-made to French local governments, the approach is adaptable to other contexts. Whether it is called a capital investment plan, multi-annual budget, or infrastructure investment roadmap, the principles remain the same: 

• Anchor climate goals in long-term financial planning 
• Mobilize all sectors of local government around climate action 
• Use the investment plan as both a management, fundraising and advocacy tool 

Adopting a climate-aligned investment planning approach can make climate objectives tangible, fundable, and achievable. It is therefore a relevant tool not only for local authorities, but also for the national and EU level policy makers who recognise that meeting ambitious climate objectives requires innovative tools and increased capabilities at the local level. As the EU aims to stay on course to meet its mid- and long-term emission reduction targets, the investment planning approach can equip cities to better lead and deliver climate transition in Europe.      

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This project is part of the SLPF project (sustainability in local public finances). This project is funded by the European Union via the Technical Support Instrument, and implemented by Expertise France, in cooperation with the European Commission. This project is produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union.

L’article Empowering local governments to meet the cost of climate action est apparu en premier sur I4CE.

Jean Pisani-Ferry, chair of I4CE 

We are witnessing a withdrawal of commitments to climate action. In the US, President Donald Trump does not hide his hostility to what he calls the ‘climate hoax’. In Europe and in France, new narratives around competitiveness, strategic autonomy and security are gaining ground, reflecting a new political reality. If there is still a broad consensus on the long-term objective of climate neutrality, how to get there is increasingly challenged, generating uncertainty. The scarcity of fiscal resources impacts the willingness to embark on the green transition.

At the same time, we experience the impact of climate change through extreme weather events with high human, economic and material costs. Hesitations or backtracking on climate action will generate delays that translate into increased costs of mitigation and adaptation easures in the future. We cannot afford it – neither people nor planet. Moreover, decarbonisation delays hamper energy competitiveness.

10 years after the adoption of the Paris Agreement, Donald Trump’s withdrawal and determination to increase domestic oil and gas production, put the commitment of others at risk. EU’s leadership and capacity to build new alliances for an ambitious climate agenda at the global level, is needed more than ever. Europe’s clean industrial transition is an opportunity to demonstrate that decarbonisation and competitiveness can go hand-in-hand.

If the context is challenging, 2025 also offers momentum for advancing the cause for climate, including at COP30. I4CE is determined to respond to a new political context offering a long-term perspective and evidencing that an efficient, effective and socially fair climate transition is the only possible pathway ahead. To achieve this, we must operate with persistence and resilience, whilst doubling our efforts to shape new partnerships to increase our reach.

Benoit Leguet, managing director of I4CE 

2024, was a roller coaster of change in France. Despite rapid turnovers and shortlived governments, we maintained a constructive dialogue with ministers, cabinets and their administrations on the public policy mix required to meet the objectives of the climate transition and efficient public investments in times of budgetary constraints.

In Europe, we started the year with the launch of our flagship report on the European Climate Investment Deficit. A milestone in our involvement with the EU institutions, it provided a solid contribution as the new political mandate kicked off, with a reinforced focus on investments to both boost competitiveness and decarbonise the economy.

Our international engagement has grown through new strategic par tnerships. We have consolidated our expertise on country financing plans and investment needs assessments, while contributing to reinforcing alignment with the Paris Agreement through facilitation of dialogue between public and private financial institutions.

Internally, we have consolidated our team and structures following a period of growth, ensuring stability and effective work processes going forward. A thriving team is essential to the quality of our work, for our expertise to continue to grow and for our continued engagement with policy makers.

We are proud of the progress achieved in a year full of challenges and change. As the pertinence of our research grows, we see an increased recognition of our expertise and a continued impact on the debates and developments that shape the policies for the climate transition.

In 2025, is not only the 10 years anniversary of the Paris Agreement but also of our Institute, and we are looking forward to celebrating with partners and friends. Although we have challenging times ahead of us, we are confident that we can continue to build our momentum.

Click here to see the annual report 2024 :”The pathway for climate investments in turbulent times”

L’article The pathway for climate investments in turbulent times – annual report 2024 est apparu en premier sur I4CE.

Responding to a political context 

By eliminating the fuel tax, Carney is attempting to prevent conservatives from capitalizing on a measure that has become central to their campaign ahead of the federal elections, taking place by this fall. Since its introduction, the tax’s removal has been a primary demand of the opposition, encapsulated in the slogan “axe the tax.” 

The Federal Fuel Charge was a key piece is Canada’s climate policy. It was one of the two components of Pan Canadian Approach to Pricing Carbon Pollution, in place since 2019. The other component, the Output-Based Pricing System (OBPS) –a regulatory emissions trading system for industry– remains in place and is expected to be strengthened. 

The decision, which is part of a broader set of measures, responds to a political context rather than the ineffectiveness of the policy or a verified impact on affordability. Since federal carbon pricing took effect, Canada’s GHG emissions have fallen by almost 8%, although other policies were also at work. A report from the Canadian Climate Institute shows that federal and provincial carbon pricing, for industries and consumers, was expected to account for almost half of Canada’s emissions reductions by 2030. Moreover, carbon pricing policies including the Federal Fuel Charge and the British Columbia carbon tax have had a minimal impact on inflation, contributing less than 0.5% to increases in consumer prices since 2019, according to a study published last December by the Institute for Research on Public Policy.  

The relevance of Canada’s carbon tax and the need for measures to fill the gap 

Canada’s carbon tax was significant for several reasons, particularly its revenue redistribution mechanism that helped protect vulnerable households from rising prices. According to a report published in 2024 by I4CE, 90% of the collected revenue was returned to households on a non-selective basis through the Canada Carbon Rebate, 9% was allocated to supporting small and medium-sized enterprises (SMEs), especially those in high-emission and trade-exposed sectors, as well as farmers, and the remaining 1% was directed to indigenous communities. This mechanism helped protect vulnerable households from price increases caused by the energy crisis, not solely those linked to the carbon tax itself. 

Without compensatory measures, eliminating the carbon tax would lead to at least two major environmental and socio-economic issues. First, Canada’s emissions would not decline as quickly, as the tax’s incentive effect would be lost. Second, without the Canada Carbon Rebate—funded by tax revenues—most households would face greater inflationary pressure, particularly low- and middle-income families, for whom the rebate represented a net financial gain. 

Aware of the negative effects of eliminating the carbon tax, Mark Carney included a package of incentive-based climate measures in his plan. The plan is based on three main levers. First, the creation of a Canadian Industrial Competitiveness Strategy by strengthening and tightening the Performance-based Pricing System (PPS) for large industrial emitters, among other measures. Second, providing investment incentives for green building, electrification of transportation, and directly rewarding consumers for sustainable behaviour. Third, mobilising investment to create jobs and stimulate economic growth through sustainable finance. The cost-effectiveness of this new policy package is yet to be seen, but it inspires optimism for the way forward. 

The global context of carbon taxation and why this is not the end for carbon taxes 

The abolition of Canada’s carbon tax highlights the political challenges surrounding its implementation. Canada is not alone in reassessing its carbon pricing policies. In France, the 2018 attempt to increase the carbon tax triggered the Yellow Vest movement. Similarly, in Australia, the carbon tax introduced in 2012 was repealed in 2014 under political pressure. 

Despite these challenges, several new carbon taxes were introduced in 2023. Slovenia reinstated its carbon tax, while new carbon taxes were implemented in Taiwan, China, and the Mexican state of Guanajuato. Additionally, Hungary introduced a new carbon tax targeting participants in the EU Emissions Trading System (ETS) who receive at least half of their allowances for free. 

Currently, 39 carbon taxes are in effect worldwide, according to the annual State & Trends of Carbon Pricing report by the World Bank, to which I4CE contributes. These taxes, along with 36 emissions trading systems (ETS), collectively cover approximately 24% of global greenhouse gas emissions. The implementation of these carbon pricing mechanisms generated record revenues in 2023, exceeding $100 billion globally, the majority of which have been used for climate action. 

L’article In the absence of a carbon tax in Canada, measures to fill the gap are essential  est apparu en premier sur I4CE.