Climate, Finance and Growth: a Nowhere to Be Found Tango of Economy-Climate Models?

Étienne ESPAGNE Économiste, Agence française de développement (AFD). Contact : eespagne@afd.fr.


This paper presents a synthesis of the emerging literature related to the trio climate-finance-growth. It sheds light on the pros and cons of the integrated economy-climate models for the analysis of this trio. We first show how in the integrated assessment models, starting with the seminal Nordhaus’ DICE (2014), growth (improperly) takes precedence over the climate-related damages because investments in a low carbon sector systematically crowd-out the others sectors, with detrimental effects on both short term and long term growth. Moreover, in this perfect financial market framework, this re-allocation of resources drags no disturbing consequences. Finally the rational expectations of a representative agent completely determine the economic long-run equilibrium, leaving no place for any lasting financial or monetary effect. We then progressively relax theses hypotheses to put forward a synthesis of the very recent literature, mainly based on neo-keynesian models. Nonetheless, it appears that the integration finance-climate-growth in the economy-climate models is far from being solved.


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Footnotes

1   « Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. »

2   Cette dernière approche subsiste d'ailleurs au sein de la décision adoptant l'Accord de Paris avec la perpétuation de l'engagement des 100 Md€ annuels de transferts à l'horizon 2020 (Paragraphe 53).

3   On peut citer un grand nombre d'autres initiatives plus localisées, qui sont plus systématiquement décrites dans (Aglietta et al., 2016).

4   2 400 Md$ d'investissements annuels dans les énergies propres selon l'AIE (2014), pour respecter un plafond de 450 ppm (parties par millions) de concentration de CO2 (ce qui correspond peu ou prou au plafond de +2 °C en températures).

5   Une importante part des débats académiques entre économistes du climat porte sur la « bonne » valeur de ce taux d'actualisation (Espagne et al., 2012).

6   Pour citer (Kalecki, 1971) : « The long-run trend is but a slowly changing component of a chain of short-run situations; it has no independant entity. »

7   Ces économies sont bien caractérisées par Cahen-Fourot et Lavoie (2016) : « Money is created through credit previously to the production process: it anticipates the socially validated production arising from both the market and the non-market sectors. Ultimately, the central bank closes the macroeconomic circuit by refinancing the banks that are in need of central bank money and by lending to the State. »


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