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Financing energy and low-carbon investment: public guarantees and the ECB

Author

Listed:
  • Michel Aglietta

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Etienne Espagne

Abstract

The eurozone has been said to have caught a disease called "secular stagnation". Productive investment in the private sector fell by about 20% overall between 2007 and 2014, while private saving has surged, creating a huge gap between gross domestic savings and investment. The trajectory of actual GDP has decoupled from successive estimates of potential GDP, and there is no sign of a spontaneous short-term adjustment. The engineering of a powerful investment drive seems the only way out of this self-fulfilling low-growth trap. The European Union has already set investment objectives in the Climate and Energy Package. These targets cover four areas: renewable energy supply capacity, electricity distribution networks, energy efficiency in building renovation and urban mobility. Several financing tools need to be combined to tailor risk-sharing devices for investments in each of these sectors. First and foremost, is the integration of a high carbon price. However, as any sudden sharp increase in the overall carbon price would have a major (and politically unsustainable) impact on the rest of the economy, a core issue is how to create a transitory distinction between the carbon price included/paid by the existing capital stock and the carbon price included/paid by new low carbon investments. This can be achieved through a two-tier approach. First, for the four key sectors, a high notional carbon price is used to set an asset value on the carbon saved by new investments ("carbon asset"): these assets are accepted as repayment by central banks, and publically guaranteed. The ECB, by buying financial instruments issued by the low-carbon investors, creates a direct transmission channel to these areas of the economy. Second, fiscal measures ensure the carbon price catches up with the notional value, thus generating revenues that allow for the purchase of the carbon debt held by the central banks, guaranteeing the final budget neutrality of the process. By
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Suggested Citation

  • Michel Aglietta & Etienne Espagne, 2015. "Financing energy and low-carbon investment: public guarantees and the ECB," Working Papers hal-01671394, HAL.
    • Handle: RePEc:hal:wpaper:hal-01671394
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    References listed on IDEAS

    as
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    Cited by:

    1. Xavier Chojnicki & Anthony Edo & Lionel Ragot, 2016. "Intra-European Labor Migration in Crisis Times," Post-Print hal-01610055, HAL.
    2. Michel Aglietta & Virginie Coudert, 2015. "Currency Turmoil in an Unbalanced World Economy," Bankers, Markets & Investors, ESKA Publishing, issue 139, pages 46-57, November-.
    3. Hillel Rapoport, 2017. "Who is Afraid of the Brain Drain? A Development Economist’s View," CEPII Policy Brief 2017-14, CEPII research center.
    4. Etienne Espagne, 2016. "Climate Finance at COP21 and After: Lessons Learnt," CEPII Policy Brief 2016-09, CEPII research center.
    5. Natacha Valla & Jesper Berg & Laurent Clerc & Olivier Garnier & Erik Nielsen, 2015. "A holistic approach to ECB asset purchases, the Investment Plan and CMU," CEPII Policy Brief 2015-07, CEPII research center.
    6. Matthieu Crozet & Gianluca Orefice, 2017. "Trade and Labor Market: What Do We Know?," CEPII Policy Brief 2017-15, CEPII research center.
    7. Agbloyor, Elikplimi Kolma & Dwumfour, Richard Adjei & Pan, Lei & Yawson, Alfred, 2021. "Carbon emissions and banking stability: Global evidence," MPRA Paper 111092, University Library of Munich, Germany.
    8. Michel Aglietta & Guo Bai, 2016. "China’s 13th Five-Year Plan. In Pursuit of a “Moderately Prosperous Society”," CEPII Policy Brief 2016-12, CEPII research center.
    9. Cecilia Bellora & Sébastien Jean, 2016. "Granting Market Economy Status to China in the EU: An Economic Impact Assessment," CEPII Policy Brief 2016-11, CEPII research center.
    10. Michel Aglietta & Guo Bai, 2016. "China’s 13th Five-Year Plan. In Pursuit of a “Moderately Prosperous Society”," CEPII Policy Brief 2016-12, CEPII research center.

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    Keywords

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    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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