“Redistributive carbon pricing should be implemented”

Tribune. In terms of its magnitude, the recent surge in energy prices has only one precedent: the oil shock of 1973. It comes at a time when the energy transition begins, which should free us from addiction to fossil fuels. It sends a triple signal to the COP in Glasgow. To accelerate the exit from the fossil fuel economy, negotiators should learn three lessons.

The first concerns the investment deficit in alternative means of production to fossil sources. Despite the sharp acceleration in investments over the past decade, the deployment of renewable energies, electricity storage and smart energy grids is too slow to provide the additional energy demanded by the recovery in global activity.

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The low-carbon transition requires a massive movement of capital to be carried out in record time. This capital immobilized to produce fossil energy today represents around 80% of the global stock. It is necessary to replace it quickly with capacities allowing the supply of carbon-free energy. And therefore invest more in zero carbon. According to the decarbonisation scenario of the International Energy Agency (IEA), this would require more than doubling the amount of current investments in energy.

The risk of stagflation

Correcting this investment deficit is a condition for the success of the low-carbon transition. But it will not be enough. The second lesson of the current crisis concerns the demand for energy which is restarting far too strongly. Without a major shift in this demand, the additional investment in carbon-free capacities will be added to the existing capital stock without replacing it.

The virtuous scenario of the IEA thus postulates that the quantity of energy consumed per unit of GDP will decrease by 4% per year in the future. This represents a tripling of energy efficiency gains which, according to Agency experts, would make it possible to make the transition without weighing on economic growth. The Agency remains discreet about the conditions of such a historic break.

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The signal sent by the markets is unambiguous. The hoped-for break is not there. The excessively strong recovery in energy demand generates direct (energy) and indirect (metals necessary for the transition) price increases that risk causing the economy to fall back into a state unknown since the 1970s: that of stagflation.

Action on demand

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