Trésor-Info - Publications de la direction générale du Trésor - climate

The Role of Carbon Credits in Financing Global Climate Goals

2025-11-25T00:00:00+01:00

Carbon credits are financial instruments aimed at supporting greenhouse gas emission reduction or carbon removal projects, especially in developing countries. Businesses use them to offset some of the emissions generated by their operations (offsetting) or to demonstrate their environmental commitment (contribution), for example by funding afforestation projects.

Carbon credits, which help to raise private-sector funding for climate initiatives, are instruments that can be used alongside, but are distinct from, emission trading schemes such as the European Union Emissions Trading System (EU ETS).

In 2024, around $500m in credits were traded on carbon credit markets globally. These markets are experiencing a crisis due to supply-side quality issues as well as challenges to the credibility of the principle of offsetting emissions owing to several greenwashing scandals. Several public- and private-sector initiatives are nevertheless seeking to better regulate practices to ensure the market’s credibility and real climate benefits. The establishment of an international carbon credit trading scheme is foreseen by the Paris Agreement on climate change, with the aim of providing a firm foundation for the market and fostering climate cooperation between countries.

EU Member States have adopted a climate target for 2040 that will allow high-quality international carbon credits to be used to contribute up to 5% towards the target, thereby helping to achieve European climate goals cost-efficiently by raising EU funding for projects outside the bloc. In addition, the European Commission has proposed to integrate permanent carbon removal projects, located on European soil, into the EU Emissions Trading System (EU ETS).

French Public Climate Finance for Developing Countries: an Overview and the Issues at Stake

2024-11-19T00:00:00+01:00

Together with other developed countries, France provides public finance to developing countries to assist them in implementing the Paris Agreement to mitigate climate change and adapt to its effects. In 2023, France provided €7.2bn to these countries in the form of loans, grants, equities and guarantees for their climate action.

France’s contribution helps to achieve the annual goal of mobilising $100bn for developing countries, set in 2009 at the 15th Conference of Parties (COP15) in Copenhagen. This goal was surpassed for the first time in 2022, with $115.9bn recorded by the OECD. France is one of the largest contributors among developed countries, and can be considered to provide more than its “fair share” in attaining this goal.

This public climate finance provided by developed countries is essential in certain regions and for certain investment types – particularly climate change adaptation investment. However, this financing only constitutes a minority share of climate finance in developing countries. The $100bn goal is set to be replaced in 2025 by another goal established in late 2024 at COP29 in Baku (Azerbaijan). This new goal is expected to mobilise even more public finance from even more countries, while also setting a bold target for private-sector finance, which is already significant but needs to be considerably ramped up.

World Economic Outlook in Autumn 2024: Monetary Easing and Geopolitical Tensions

2024-09-19T00:00:00+02:00

Global growth is expected to reach 3.2% in 2024, a similar rate to 2023, before increasing to 3.4% in 2025. This outlook is a slight improvement on forecasts released in spring 2024. In 2025, global activity is anticipated to grow at the same pace as in the second half of the 2010s, supported by monetary policy easing and strong performances in emerging countries.

Growth is forecast to remain uneven across advanced economies. In 2024, activity is expected to be particularly robust in the United States and Spain, more moderate in Italy and the United Kingdom and flat in Germany. These advanced economies are experiencing different levels of growth due to disparities in consumption patterns and export performance. Growth rates are expected to converge in 2025, with an acceleration of activity in the euro area and a slight slowdown in the United States, primarily due to a weakening of household consumption.

Although still strong, activity in the major emerging economies – China, India, Brazil and Turkey – is projected to slow compared with 2023, particularly in China where structural imbalances are likely to continue to weigh on activity.

Following a contraction in 2023, global trade is anticipated to recover in 2024 and accelerate in 2025. Global trade is expected to be driven primarily by emerging economies and the United States, resulting in slower growth in global demand for French exports (see Chart).

Global activity could nonetheless be impacted by an escalation of geopolitical tensions, which are the main risks surrounding this scenario.

Mésange Vert, a New Model to Assess the Impact of Economic Shocks on France’s Carbon Emissions

2024-07-09T00:00:00+02:00

Mésange Vert extends the scope of the macroeconomic model Mésange (Modèle économétrique de simulation et d’analyse générale de l’économie) used by the French Treasury (DG Trésor). The new module quantifies the impact of economic shocks and policy reforms on France’s carbon emissions in the medium and long terms. Besides measuring the climate impact of standard shocks, it is also a useful addition to the toolkit for assessing economic and climate policies.

Mésange Vert is structured in two parts: energy and climate. The energy component gives a stylised view of the country’s final energy consumption and how it breaks down between gas, electricity and other sources, while the climate component calculates the carbon emissions associated with this energy profile.

The module is designed to be extremely flexible to use: the default settings include several energy sources (electricity, coal, oil and gas) and two economic agents (households and firms). Other features, such as the method for calculating energy demand and calibrating the model can all be easily adjusted as needed to fit modelling requirements.

Mésange Vert can be used, for example, to analyse and compare the economic and climate effects of a permanent increase in VAT and the carbon tax to generate extra revenue equivalent to one percentage point of ex ante GDP in each case, without recycling the revenue generated. Compared to a VAT increase, putting up the carbon tax would have a slightly lower negative impact on the economy. And, by specifically targeting energy use, the carbon tax option would lead to a far greater reduction in energy consumption than a VAT increase. In addition, the carbon tax would encourage households and firms to switch from fossil fuels to electricity, making the reduction in emissions proportionally greater than the drop in energy consumption.

How Much Investment Is Required To Reach France’s Decarbonisation Targets For 2030?

2024-04-04T00:00:00+02:00

A large-scale redirection of investment flows towards decarbonisation items is required for France to achieve its climate targets. Many estimates of the additional low-carbon investment needs have been made, ranging from €55 billion to €130 billion per year from now to 2030 (an additional two to five percentage points of GDP). Comparing these estimates is particularly challenging given the wide range of definitions, methods and scopes used.

Theoretically, minimising the costs of decarbonisation should be based on a comprehensive analysis of the abatement costs of each intervention across the entire economy. In practice, the investment needs are calculated by sector.

When applying a consistent methodology across sectors, the gross additional investment needs in low-carbon items (compared to 2021) are estimated at approximately €110 billion per year by 2030.

When deducting the lower investments in (i) carbon-emitting alternatives (e.g. only factoring in the additional cost of an electric vehicle compared to an internal combustion engine vehicle), and (ii) newbuilds, assuming reduced land take, the net additional investment needs would drop to €63 billion per year (see Chart opposite). This net requirement could be further reduced by the reduction of other fossil fuel investments (e.g. lower demand for new internal combustion engine vehicles) and by energy bill savings.

These estimates are subject to considerable uncertainties. In addition, the share of the effort between public and private economic agents is not addressed in this paper, as it will depend on the set of public policies implemented.

Emerging Economies and Climate Change

2023-06-15T00:00:00+02:00

The economic effects of climate change are becoming increasingly consequential as the pace of long-term environmental changes accelerates and extreme weather events increase in frequency and intensity. Vulnerability to climate change has become central to identifying and assessing potential risks to the growth trajectories of emerging economies. A country may be considered vulnerable due to its physical exposure to climate change, the sectoral composition of its economy or its adaptive capacity.

Most of the major emerging economies are low contributors to global warming, yet they are much more vulnerable to its consequences than advanced economies, albeit to differing degrees of exposure (see chart on this page). The countries most exposed to environmental changes (rising sea levels, desertification) and extreme weather events are those in tropical areas in sub-Saharan Africa, Asia and Latin America.

The sectoral and geographic structure of some emerging economies increases their vulnerability to climate change. Those particularly dependent on rain-fed agriculture are expected to suffer lower crop yields (sub-Saharan Africa and Southern Asia), whereas countries where most of the economic activity is in coastal regions will have to contend with rising sea levels (Southeast Asia). Arid and semi-arid regions (North Africa and the Middle East) could see disastrous consequences from water stress.

Not all emerging economies have the same adaptive capacity to cope with these changes, and the variation between them is closely tied to their level of development. The lack of infrastructure or medical professionals, for example, could significantly exacerbate the consequences of climate change in numerous countries. International cooperation is both needed and warranted to reduce the impacts of climate change on these economies and the associated side effects.

Publication of the implementing decree of Article 29 of the Energy-Climate Law on non-financial reporting by market players

2021-06-08T00:00:00+02:00

Published in the Official Journal on May 27^th 2021, the implementing decree for Article 29 of the Energy-Climate Law revises, clarifies and strengthens sustainability-related financial disclosures for market players. The decree contributes to greening the financial system as it supplements existing European legislation in three complementary areas: climate, biodiversity, and the integration of ESG factors in governance and risk management of financial institutions - making it is a cornerstone of sustainable finance legislation.

The decree is in line with existing European law, which has been strongly influenced by a pioneering French legislative framework since 2015

Since 2015, the French legislative framework already includes a regulatory framework for ESG transparency of investors (most notably on climate change). Article 173-VI of the French Energy Transition for Green Growth Act already required, indeed, systematic disclosure of the ways in which ESG criteria are taken into consideration in investment policies and risk management procedures, while encouraging financial actors to factor in climate-related risks.

The application review of the French framework then enabled, in 2019, to take stocks of lessons learned. It strongly influenced the European Disclosure framework, and most particularly the so-called "Disclosure" regulation - one of the pillars of the EU sustainable finance strategy.

Article 29 of Law No. 2019-1147 (Energy-Climate Law) of November 8^th 2019 falls within this context, and articulates French and EU requirements with a triple objective:

Safeguard and clarify the regulatory layout resulting from Article 173-VI;
Enhance this layout in order to meet the requirements of the Energy-Climate Law, with a focus on climate change and biodiversity erosion-related risks disclosure;
Learn from the lessons of French non-financial reporting experience, notably with regards to the structuration of information disclosed according to the following key pillars (defined by the Task Force on Climate-Related Financial Disclosures): strategy, governance, risk management and the use of specific metrics and targets.

The implementing decree supplements European law in 3 key areas

The implementing decree defines the practical details of Article 29 and complements European law in three key complementary areas:

Climate - notably with the required disclosure of alignment strategies with regards to the temperature objectives of the Paris Agreement (quantitative greenhouse gas emission targets to be set every five years until 2050), as well as the share of Taxonomy-aligned assets (or balance-sheet) and finally the share of fossil fuels related activities;
Biodiversity - notably through the required disclosure of alignment strategies with regards to international biodiversity preservation objectives (quantified target to be set);
ESG factors to be fully integrated in the risk management, governance and transition support systems (notably shareholder engagement) of financial actors.

+ Read the decree >>

The decree implementing Article 29 of the Energy-Climate Law was prepared jointly by the French Treasury Department and the Ministry for the Ecological Transition. Officers from the French Treasury carried out the upstream technical analysis and in-depth consultations prior to the drafting of this text. A close dialogue was maintained with market participants and supervisors of Paris marketplace, as well as think tanks, research institutes and non-governmental organizations.