Nogent / Marne, January 29 2015
1
Photo : Mairie de Paris
The IMACLIM modeling platform
Principles, methodologies and applications
Franck Lecocq and IMACLIM modeling team
IMACLIM modeling Platform 1st International Workshop
29th January 2015
CIRED
What is IMACLIM?
• IMpact Assessment of CLIMate policies
• A suite of dynamic CGE models designed to assess consistency over
the medium and long-run between environment (notably climate
mitigation) and development objectives at different scales (World,
regions, countries)
• Featuring:
– Consistent physical / economic accounting
– Explicit socio-technical constraints on production and consumption
– Second-best economic features
• Developed at CIRED, and in collaboration with COPPE/UFRJ
(Imaclim-Brazil) and ERC/Cape-Town U. (Imaclim SA) over 20
years
Two versions around the same core
Economic signals
(prices, quantities,
Investments)
Bottom-up modules
Industry
Agricolture
Electricity
Energy
Coal
Transport
Transport
Annual Equilibrium (t0)
under constraints
Annual Equilibrium (t0 +1)
under updated constraints
Annual Equilibrium (t0 +n)
under updated constraints
Technical and structural
parameters
(i-o coefficients,
population,
productivity)
Representative agent/
N sectors
Heterogeneous socioeconomic groups/
N’>N sectors
Reduced forms of dynamic evolutions
Annual Equilibrium (t0)
Annual Equilibrium (t0+n)
I
M
A
C
L
I
M
R
I
M
A
C
L
I
M
S
The IMACLIM Family (as of 1/2015)
IMACLIM-S
Brazil
Nexus
Land Use
IMACLIM-S
AfSud
IMACLIMR World
IMACLIM-S
France
IMACLIMR France
Nexus Cities
Nexus
Elec.
Res-IRF
IMACLIM-S
EUROPE
The IMACLIM Team (as of 01/2015)
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Jean-Charles Hourcade
Christophe Cassen
Frédéric Ghersi
Céline Guivarch
Aurélie Méjean
Eoin O’Bruin
Emmanuel Combet
Thierry Brunelle
Julien Lefèvre
Ruben Bibas
Meriem Hamdi-Cherif
Gaëlle Le Treut
Florian Leblanc
Elsa Mosseri
Jules Schers
William Dang
8 ongoing PhDs ; 4 term researchers ; 4 researchers
Examples of recent projects
 Global scale with IMACLIM World
 Long-term scenarios: development styles, technical change and macroeconomic trajectories
 Resource depletion and energy markets (peak oil)
 Climate policy analysis: time profiles of costs, sensitivity to technical assumptions, impact of
different policy architecture
 Urban systems and macroeconomic trajectories
 Energy, land use and food markets (Nexus land-use)
 Regional/national scale with IMACLIM “Countries”
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Carbon tax and (i) distributive justice ; (ii) pensions and public finance ; (iii) labour market
and competitiveness (France)
Structural change, mitigation and inclusive transition (Brazil)
Employment, education and mitigation (South Africa)
Energy transition towards a low-carbon economy: sectoral policies, co-benefits and costs in
the short-run, impact of different paces of phasing nuclear out (France)
 European projects AMPERE, GLOBIS, RECIPE, AUGUR, ADVANCE,
expertise for IEA, World Bank, OECD, etc.
Selected publications
- Brunelle, Th., Dumas, P., Souty,F. The Impact of Globalization on Food and Agriculture : The Case of the Diet Convergence, The Journal of Environment &
Development March 2014 23 : 41-65
- Bibas, R., Méjean, A., Hamdi-Cherif, M., 2014. "Energy efficiency policies and the timing of action : An assessment of climate mitigation costs" Forthcoming in
Technological Forecasting and Social Change
- Riahi, K., Kriegler, E., Johnson, N., Bertram, C., den Elzen, M., Eom, J., Schae er, M., Edmonds, J., Isaac, M., Krey, V., Longden, T., Luderer, G., Mejean, A.,
McCollum, D., Mima, S., Turton,H., van Vuuren, D., Wada, K., Bosetti, V., Capros, P., Criqui, P., Kainuma, M. (2013) Locked into Copenhagen Pledges - Implications of
short-term emission targets for the cost and feasibility of long-term climate goals. Technological Forecasting and Social Change.
Bauer, N., Bosetti, V., Calvin K., Hamdi-Cherif, M., Kitous, A., McCollum, D., Mejean, A., Shilpa, R., Turton, H., Paroussos, L., Ashina, S., Wada, K. (2013) CO2
emission mitigation and fossil fuel markets : Dynamic andinternational aspects of climate policies. Forthcoming in Technological Forecasting and Social Change.
- Bibas, R., Mejean, A. (2013) Potential and limitations of bioenergy options for low carbon transitions, Climatic Change (December 2013)
- Waisman H., Guivarch C., Grazi F. & Jean Charles HourcadeThe Imaclim-R model : infrastructures, technical inertia and the costs of low carbon futures under imperfect
foresight, 2012, Climatic Change, Volume 114, Number 1
- Waisman, H., Rozenberg J., Sassi O., Hourcade J-C, 2012, Peak Oil profiles through the lens of a general equilibrium assessment, Energy Policy (2012), pp. 744-753
- Guivarch, C., Hallegatte, S. 2011. Existing infrastructure and the 2°C target. Climatic Change 109:801–805.
- Guivarch, C., Crassous, R., Sassi, O., Hallegatte, S. 2011. ‘The costs of climate policies in a second best world with labour market imperfections’. Climate Policy 11 :
768–788. Working Paper version
- Giraudet, L.-G., C. Guivarch, P. Quirion, 2011, ‘Comparing and combining energy saving policies. Will proposed residential sector policies meet French official targets ?’
The Energy Journal 32, Special issue EMF25.
- Hourcade, J.-C., Ghersi F., Combet, E., Thery D. (2010), "Carbon Tax and Equity : The Importance of Policy Design", in Dias Soares, C., Milne, J., Ashiabor, H.,
Deketelaere, K., Kreiser, L. (ed.), Critical Issues in Environmental Taxation, Oxford University Press, Oxford, pp. 277-295.
- Rozenberg J., Hallegatte S.,Vogt-Schilb A., Sassi S, Guivarch C., Waisman H., Hourcade J.C, Climate policies as a hedge against the uncertainty
on future oil supply, Climatic Change Letter and the supplementary material, DOI 10.1007/s10584-010-9868-8, june 2010
- Sassi O., Crassous R., Hourcade J.-C., Gitz V., Waisman H., Guivarch C., 2010. ‘Imaclim-R : a modelling framework to simulate sustainable development pathways’,
International Journal of Global Environmental Issues, Special Issue on Models for Sustainable Development for Resolving Global Environmental Issues : Vol. 10, Nos. 1/2,
pp.5–24. Working Paper version
- Mathy, S., Guivarch, C. 2010. ‘Climate policies in a second-best world - A case study on India’, Energy Policy 38:3, 1519-1528. Working Paper version
- Guivarch, C., Hallegatte, H., Crassous, R., 2009, ‘The resilience of the Indian economy to rising oil prices as a validation test for a global energy–environment–economy
CGE model’, Energy Policy 37:11, 4259–4266. Working Paper version
- Crassous, R., Hourcade, J.-C., Sassi, O., 2006, ‘Endogenous structural change and climate targets : modeling experiments with Imaclim-R’, Energy Journal, Special Issue
on the Innovation Modeling Comparison Project
- Ghersi, F. et J.-C. Hourcade (2006), « Macroeconomic Consistency Issues in E3 Modeling : The Continued Fable of the Elephant and the Rabbit », TheEnergy Journal,
numéro spécial Hybrid Modeling of Energy Environment Policies : reconciling Bottom-up and Top-down : pp. 39-62
- Hourcade, J.-C., Jaccard, M., Bataille, C. et F. Ghersi (2006), « Hybrid Modeling : New Answers to Old Challenges », The Energy Journal, introduction au numéro
spécial Hybrid Modeling of Energy-Environment Policies : reconciling Bottom-up and Top-down : pp. 1-12.
- Ghersi, F., J.-C. Hourcade et P. Criqui (2003), « Viable Responses to the Equity-Responsibility Dilemma : a Consequentialist View », Climate Policy 3 (1) : pp. 115-133.
- Hourcade, J.-C. et F. Ghersi (2002),« The Economics of a Lost Deal : Kyoto - The Hague -Marrakesh », The Energy Journal 23 (3) : pp. 1-26.
- Hourcade, J.-C. et F. Ghersi (1997), « Les Enjeux des QELROS : entre Logique Économique et Logique de Négociation », Revue de l’Énergie 491 : pp. 593-605
Basic elements underpinning the IMACLIM models
1. Articulating monetary and physical accountings
2. Articulating technical and economic expertise: Bottom-up / Top-down
3. Articulating growth at different time scales: natural growth / real growth
… “Triple hybridization”
Basic elements underpinning the IMACLIM models
1. Articulating monetary and physical accountings
 Dual and consistent description of monetary flows (from I/O tables) and “physical”
quantities (energy balances in MToe, transport statistics in pkm)
 Technical coefficients in physical units to characterize production and consumption
processes
Towards dual accounting systems
Objective: Represent consistent monetary and physical accounting
 Arrow-Debreu axiomatic of general equilibrium w/simultaneous equilibrium of
economic and material flows linked by the price system
 Allows to embark information about technical constraints on production / consumption
in a way consistent with engineers’ views
Problem: There is no dataset consistent in quantities/values in official statistics
Solution: We build our own accounting tables in both monetary values and
physical quantities by combining macroeconomic tables and balances of
physical flows. A significant amount of work.
Methodology
Available
energy statistics
Step 1
Matrix of quantities
(energy unit)
FC
IC
MAT
MAT
IC
Matrix of prices
(currency/energy unit)
Qij
Pij
M
Step 2
M
FC
Energy bills (currency)
MAT
CI
CF
M
Vij = Pij . Qij
ENERGY
VA
ENERGY
OTHER
OTHER
M
Step 3
CF
‘Hybrid matrix’
for energy
Vij
Statistical gaps allocated
to non-energy goods
Implication #1. A richer, and more accurate picture of the
economic system
We find that including hybrid accounting has crucial impact on
macroeconomic analysis: Energy/GDP ratio, energy bills and CO2
emissions of households and firms
This is because there are important statistical gaps between national
accounts and results obtained by combining statistics on physical
quantities and prices (gaps in nomenclature)
Statistical gaps in the economic value of energy flows
French national accounts
(Input-Output table, 116 products)
Energy products/sectors
Energy statistics, AIE
Values
(2004 millions €)
Statistical gaps
Energy bills
(2004 millions €)
Coal, lignite and peat
1 965
1 558
26%
Crude oil and hydrocarbons
26 875
17 234
56%
Refined petroleum products
92 974
67 454
38%
Gaseous fuels, heat
and air conditioning
20 229
15 230
Mineral chemistry
(11 596)
(-)
(109%)
Fossil energies, commercial circuit
142 043
101 476
40%
inc. mineral chemistry
Weight in total value of production
inc. mineral chemistry
(153 639)
4,8%
(5,2%)
33%
(51%)
3,4%
1,4 pts
(1,8 pts)
Statistical gaps in the allocation of carbon emissions
Energy statistics
(calculated)
Total emissions
(Mega tons of carbon)
From production
From households
Housing / Individual vehicles
NAMEA accounts*
(published)
Statistical gaps
109 107
111 904
-2,5%
67 846 (41 261)
76 095 (35 809)
-10,8% (+15,2%)
16 / 25
17 / 19
-6,0% / 34,8%
* NAMEA : National Accounting Matrix Including Environmental Accounts
Source : Pasquier (2010). Allocation based on national accounts (macro data on expenditures)
Implication #2. Overcoming limits associated with
‘monetary only’ accounting
In the description of technical change
Models using ‘monetary only’ accounting include an a-temporal description
of technical possibilities: future technical change are deduced from the past
(econometrics on monetary and macro statistics)
This representation is valid only in the short-term (‘small deviations’). The
technical plausibility of ‘important mutations’ is difficult to control (nor can
sectoral forecasts of technical change possibilities be used).
 In the description of behaviors
Models using ‘monetary only’ accounting lack ability to explicitely track
constraints on consumption associated with, e.g., basic needs (in calories),
location-related transportation needs and their evolution (in km/year), etc.
Basic elements underpinning the IMACLIM models
1. Articulating monetary and physical accountings
 Dual and consistent description of monetary flows (from I/O tables) and “physical”
quantities (energy balances in MToe, transport statistics in pkm)
 Technical coefficients in physical units to characterize production and consumption
processes
2. Articulating technical and economic expertise: Bottom-up / Top-down
 We aim to ground our projections in a realistic technical landscape  Explicit
description of infrastructure, equipments and technologies
 … and to be consistent with economic flows and relative prices  Description of
investment costs and microeconomic decisions
Two versions around the same core
 IMACLIM-S describes socio-economic interactions at a given time horizon
(e.g., 2050) (one-shot projection)
 Reduced forms of bottom-up approaches (mimic adjustment possibilities)
 Allows for heterogeneous socio-economic groups and high sectoral
resolution
 IMACLIM-R describes the trajectories of socio-economic interactions over
a given time period (e.g., 2010-2050) (step-by-step projection)
 Representative agents and aggregated description of production
 Dynamic modules describing the reaction of technical systems, resource
availability, preferences and location decisions to socio-economic signals
Representation of techniques in IMACLIM-S:
reduced forms of bottom-up modules
Using detailed bottom-up models to inform a reduced-form production possibility
frontier
Production Factor 1
Technical change that is dynamically feasible
for different sets of relative prices
(Bottom-up information)
p1(t0)
ft0
p1(t0+n)

ft0+n
p’1(t0+n)

Production Frontier
(Reduced form)
f't0+n
p2(t0)

p2(t0+n)
PFt0+n
p’2(t0+n)
Production Factor 2
Representation of techniques in IMACLIM-S:
reduced forms of bottom-up modules
Energy consumption
(physical unit, e.g. MTEO)
Quantity
of energy
at
base year
Price-elasticity
Bottom-up models used to inform reducedform production possibility frontier in
IMACLIM-S models
POLES ; Nexus-Elec. ; MESSAGE-Brazil ; SATIM
; TIAM-EU
Issues of BU/TD model articulation
Technical
asymptote
Relatif price
at base year
Relative
price
Representation of technologies in IMACLIM-R:
Detailed bottom-up modules
 Primary energy (oil, coal, gas)
 Geological, technical and geopolitical constraints
 Energy transformation
 Electricity : 15 explicit technologies, load curve
 Liquid fuels : tradeoffs btw. refined oil, biofuels and Coal-To-Liquid
 Final energy demand
 Residential : stock of m2 building shell, standards of living
 Industry : energy efficiency, fuel switch
 Transport:
• 5 explicit types of private vehicles
• constrained mobility in function of urban forms
• transport infrastructure investments across four modes
• freight transport intensity of production
Data and Resource intensive
Rationale for using the IMACLIM-S version
 A tool for sensitivity analyses by comparison of various “conceptions” about
 constraints and potentials (parametric uncertainty on techniques, resources…)
 modalities of policy implementation associated to various combination of
objectives
 the structure of interactions in the socio-economic system (nature of labor
markets, importance of market imperfections, size of the informal sectors)
 Exploring the indirect mechanisms triggered by general equilibrium interactions
by abstracting from controversies on dynamic effects
 Social and Institutional: poverty, inequalities and redistribution mechanisms
 Investments: financing sources, macroeconomic imbalances
Rationale for using the IMACLIM-R version
 A tool for exploring the dynamic effects and investigate the interplay between
short-term and long-term mechanisms
 Short-term inertias and constraints imposed by installed infrastructures
 Long-term path dependency of trajectories due to cumulative investments
decided under imperfect foresight (risk of ‘lock-in’ effects)
 Representing the material content of socio-economic trajectories as a result of
the interplay between
 Techniques: incorporation of information from technology-explicit models on
production technologies and end-use equipments
 Resources: constraints on the extraction of fossil resources
 Locations: representation of land uses at different territorial scales as from the
location of transport and housing infrastructure
Basic elements underpinning the IMACLIM models
1. Articulating monetary and physical accountings
 Dual and consistent description of monetary flows (from I/O tables) and “physical”
quantities (energy balances in MToe, transport statistics in pkm)
 Technical coefficients in physical units to characterize production and consumption
processes
2. Articulating technical and economic expertise: Bottom-up / Top-down
 We aim to ground our projections in a realistic technical landscape  Explicit
description of infrastructure, equipments and technologies
 … and to be consistent with economic flows and relative prices  Description of
investment costs and microeconomic decisions
3. Articulating growth at different time scales: natural growth / real
growth
 The long-term natural rate of growth is given by demographic and productivity trends
 Transitory disequilibria happen due to market imperfections and past suboptimal
allocation decisions under imperfect foresight
Simulating « non-optimal » economic growth
 An exogenous growth engine defining long-term trends
 Demography (total and active population)
 Labor productivity (catch-up)
 Saving rates (consistent with demographic trends)
 A model of “second best” socio-economic interactions under uncertainty
capturing short-term constraints on economic development




Imperfect foresight: adaptive anticipations
Inertia of capital stocks: past choices constrain future potentials
Market imperfections: over- or under-utilization of production factors
Physical constraint: availability of natural resources
 A flexibility to represent different beliefs/views about those constraints
Nogent / Marne, January 29 2015
26
Photo : Mairie de Paris
APPENDIX: Climate policy analysis
A variety of questions, A common approach in 5 steps
a) Delineate precisely the policy question(s) under investigation
(project of reform, objectives, domain of dialogue)
b) Identify the partners to collaborate with
( « experts », « policymakers », « stakeholders »)
c) Elaborate the structure of the model
(available data, theoretical issues, controversies)
d) Build a picture of the economy at the initial date
(hybrid matrix at a base year, statistical synthesis, diagnostic)
e) Represent dynamic interactions
(modelling economic, social, technical adjustments)
Global cost of climate policy
Introducing
climate policy
Time profiles
Source : IPCC, 2007
 Endogenous carbon price to satisfy the
emission objective at each date
Carbon emission objective
under climate policy (GtCO2)
40
35
 Global and Uniform (sectors, households)
30
25
 Recycling: lump-sum transfers
20
15
10
 no Cap&Trade
5
0
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
 no When Flexibility
Globalcosts
cost of
Global
ofclimate
climatepolicy
policy
Time profiles
Time
profiles
2,6%
0%
(in % of BAU GDP)
2,2%
-2%
Stabilization
1,8%
-4%
-6%
1,4%
-8%
1,0%
-10%
GDP variations
-12%
700
600
$/tCO2
500
BAU
Carbon tax
400
300
GDP growth rates
 High short-term losses
 carbon price under inertia constraints
 Partial medium-term recovery
 co-benefit of the climate policy (Peak Oil)
200
100
0
2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
 Long-term effects, a trade-off
 CP hedges oil depletion (fuel price)
 …but … steady increase of carbon prices
(high carbon cost)
Globalcosts
cost of
Global
ofclimate
climatepolicy
policy
Regional effects
Regional
effects
GDP variations
Globalcosts
cost of
Global
ofclimate
climatepolicy
policy
Sensitivity to technical
technical assumptions
Sensitivity
assumptions
GDP variations
Globalcosts
cost of
Global
ofclimate
climatepolicy
policy
Complementary measures
measures to
Complementary
to carbon
carbonpricing
pricing
World GDP losses
2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
0%
Carbon price ($/tCO2)
700
600
-1%
500
-2%
400
-3%
300
-4%
200
100
-5%
0
-6%
2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
 Long-term costs : Weak price sensitivity of transport-related emissions to
price increases
 complementary measures to carbon pricing in order to control
mobility : urban form, public transport facilities, logistics organization
 Other measures: Cap&Trade, Fiscal reform, recycling options…
Globalcosts
cost of
Global
ofclimate
climatepolicy
policy
Complementary measures
measures to
Complementary
to carbon
carbonpricing
pricing
Carbon tax only
Combined: Carbon tax + transportation infrastructure policy
Annual tax increment from 2005 to 2100
12
10
8
6
4
2
0
400
600
800
1000
1200
Carbon budget 2000-2100 (GtC)
1400
1600
1800
Carbon taxation in France
Policy questions and debates

Large theoretical consensus among economists
A carbon tax is the most efficient instrument in the ‘policy tool box’


But an implementation gap due to a recurrent ‘refusal front’

An increase in energy prices will harm activity and employment

entails a negative impact on the most vulnerable households and sectors

Unilateral policy will create harmful competitiveness distortion

Risk to jeopardize other structural objectives (recovery, social protection, deficits)
Lessons from a modeling exercise applied to France
Evaluation of the mid term impacts of a unilateral CT without border adjustment,
on the CO2 content of all consumptions, and reaching high levels (200-300€/tCO2)
2 periods: 1984-2004 (retrospective) and 2004-2020 (prospective)
The simulation platform IMACLIM-S.2.4
Simultaneous equilibria in monetary and
physical units (MTOE)
Limited adaptation
capacity
20 income classes
Prices,
Incomes
limited adaptation
capacity
(technical constraints)
4 productions
Equilibrium
unemployment
(constraint on the
adjustment of wage)
Final
demand
(3E + 1 ‘Composite’)
Transfers
(technical constraints
& basic needs for energy)
Taxes
Exports
Rest of the world
Imports
Flows of products & funds
Payroll & other taxes
Public administrations
Public finance modalities
(Informational constraint and multiplicity of objectives)
International trade
competitiveness function
of the production costs
France in open-economy
A prerequisite: an integrated accountability
MACROECONOMY
« Physical » data
(i. e. energy balance)
Monetary
aggregates
Households’ surveys
(i. e. income and expenditure)
SYSTÈME
COHERENT
DE COMPTABILITE
Physical
aggregates
ENVIRONMENT
Disaggregation
Distribution
of aggregates
Distribution of natural and produced services
DISTRIBUTION
Recycling the
tax revenue:
lessons from
Contrasted
impacts
on the production
coststwo polar cases
Repayment
of the public debt
Lower social
security contributions
Emissions
-38.5%
-34.1%
Real GDP
-6.5%
+1.9%
Employment
-5.7%
+3.5%
Poverty
+10.1%
-1.1%
Inequalities
+1.3%
+2.0%
Public debt
-92.0%
id.
300€ / tCO2 and
•
A ‘consensus’ among economists -> limit le cost of climate action
•
A controversy: weak or strong ‘double-dividend’?
A Potential Virtuous Cycle for Activity and Employment
If the sharing of
the payroll tax cuts
actually reduces
the relative
labour costs
Carbon Tax - Lower Social Contributions
Oil bill alleviation
Reduced levies
on national incomes
Structural change
Increase in
employment
intensity
Higher
domestic
consumption
Higher
employment
If part of the reallocated
tax burden does not
ultimately fall back on
production costs
(rents, transfers)
Tax burden transfer
Decrease in
production price
Higher
competitiveness
Higher
production
Conditions for a net employment gain
Le sign of the net impact depends on 2 controversial parameters
Sensitivity of net exports
to domestic prices
I et II : Gains
I
1
III : Losses
III
II
0
Sensitivity
of net wages to
unemployment
Conditions for a net employment gain
Domaines
Unemployment Production
I
Wages
Price
Consumption
Exports
II
-
+
+
+
+
+
+
+
+
-
III
+
-
-
-
-
+
I : The positive impact on real trade is stronger
II :
The positive impact on wage growth is stronger
III :
The negative impact on energy bills is stronger
Conditions for a net employment gain
• The initial state of the economy is also important
• The domain III (activity and employment losses) is reduced with:
• A high level of unemployment
• A low level of net wages
• A high level of energy consumption by households
and higher than the energy consumption by productive systems
• Other sensitivity tests hardly change the diagnosis:
• To energy-savings potentials
• To higher margins (‘deadweight effect’ of SSC reductions)
When the « details » of policy design matter
3 types of tested ‘variables’
and robust conclusions
• Alternative recycling options
are not superior to the option
of lower social contributions
Lower VAT
Lumpt sum transfers to households
• Restrictions of the tax base
Various exemption devices
• Parameters of public finances
Various options of budgetary management
Various rules determining public expenditures
Various indexation rules of social transfers
does not solve the issues of
purchasing power & competitiveness
involve trade-offs between priorities
(public debt, current consumtion,
production et employment)
And the argument of fairness?
Poverty alleviation… at cost of higher disparities
€300/tCO2 &
Lower SSC
Direct impact
Unemployment
on the energy bill
(% points)
5% poorest
+78.3%
-12.2
Disposable
Income
Gini inequality
index
+5.4%
+0.3 pts
5% richest
+72.0%
-0.9
+7.3%
Main determinants:
1) Budget share devoted to energy, energy saving potential
2) Initial unemployment rates, jobseeker’s allowance-wage gap
3) Relative weights of income sources (activity, property, transfers, etc.)
A Trade-off Between Equity and Efficiency
Employment
1.06
Budget neutral reform (Constant Debt/GDP)
€0/tCO2
Historical France (2004)
€300/tCO2 - Lower Social Contributions
€300/tCO2 - Transfers to households
Inverted
Gini
index 1.06
0.94
1.06
GDP
Bottom twentile
1.06 consumption
The 2 schemes reduce
CO2 emissions by 34%
over the period 1985-2004
Contrasted impacts on the production costs
•
€300/tCO2 and
Green Check
Lower social security
contribution (SSC)
Total variation
+3.7%
-1.0%
energy costs variation
+1.6%
+1.6%
net wages variation
+0.1%
+1.5%
Payroll tax variation
id.
-3.6%
Same direct impact on the energy bill
BUT when social contributions tax are lowered:
•
Limited propagation of the costs increases
•
Slight alleviation of the tax burden on production
•
Higher progression of nominal net wages
But there is room for compromises
Employment
1.06
Budget neutral reform (Constant Debt/GDP)
€0/tCO2
Historical France (2004)
€300/tCO2 - Targeted Compensations
& Lower Social Contributions
Inverted
Gini
index 1.06
0.94
1.06
GDP
Bottom twentile
1.06 consumption
This compromise scheme also
reduces CO2 emissions by 34%
over the period 1985-2004
But energy vulnerability is ill-explained by ‘income’
Annual energy
budget share
80%
60%
40%
20%
0%
INSEE 2001 data, authors’ calculation
Living
standard
A variety of technical, geographic and socioeconomic factors
Four main constraints for public policies (2020)
1. Higher competition on resources and markets
•
AIE: a barrel of oil at 81-92€ (77€ in 2011)
2. Ageing of the population
•
COR: funding needs for pensions 41-48 billions (11 en 2008)
•
CEPII: important decrease in the households’ saving rate
3. Control of public deficits
4. Ambitious objective of the « facteur 4 »
•
Reducing CO2 emissions by 17% over less than 10 years
Reconnecting climate, pensions and deficits issues
Consider:
1) A 2020 France
‘COR compatible’
Three structural reforms
Higher legal retirement age (>3 yrs)
Higher social contributions (+7 pts)
2) an objective: funding
pensions over 2004-2020
€200/tCO2 - Lower SSC
& Higher Income Tax (+2 pts)
1.1
1.0
0.9
0.8
0.7
0.6
CO2 emissions
GDP
Employment
Net wages
Conclusion
Economic analysis can contribute to:
• verify the consistency in arguments
• define viable compromises despite of current controversies
Three ‘parameters’ seems crucials
1.
The principle of lowering social cotisations and their sharing
-> trade-offs between the wage progression and the control of costs
2.
The coherence between public policies
-> trade-offs between objectives and search for synergies
3.
Identification of the most vulnerables to high energy prices
-> solving of the equity/efficiency dilemma