布鲁盖尔-A-green-fiscal-pact_-climate-investment-in-times-of-budget-consolidation_22页_501kb

Summary of "A Green Fiscal Pact: Climate Investment in Times of Budget Consolidation"

Core Content

This paper discusses the challenge of increasing green public investment in the European Union (EU) while pursuing fiscal consolidation. It highlights the need for a new fiscal strategy that accommodates the EU's climate goals without undermining economic recovery. The authors emphasize the importance of a "green fiscal pact" that combines better regulatory policies and higher carbon pricing to encourage private investment in climate-related infrastructure.

Main Points

• Climate Investment Needs:
  To meet the EU's climate targets, particularly the 55% emissions reduction by 2030 and net-zero by 2050, the EU needs to increase annual green investment by about 2 percentage points of GDP. Public investment is expected to account for between 0.5% and 1% of GDP annually, which is a major fiscal effort.

• Fiscal Consolidation Challenges:
  The EU has seen significant fiscal expansion due to pandemic-related support, leading to a rise in public debt. The authors warn that past fiscal consolidations have often led to cuts in public investment, which could hinder the transition to a greener economy. The current fiscal rules, if strictly applied, may force rapid debt reduction, which could be detrimental to economic recovery.

• Green Golden Rule Proposal:
  A "Green Golden Rule" is proposed, which would exclude net green investment from the fiscal indicators used to measure compliance with fiscal rules. This would allow for more flexibility in meeting climate goals while maintaining fiscal sustainability.

• Fiscal Adjustment Scenarios:
  The paper presents two scenarios for fiscal adjustment: a "historical scenario" and a "flexible scenario". Under the flexible scenario, which allows for more moderate fiscal consolidation, the EU as a whole would consolidate by 0.3% in 2023, 0.4% in 2024, and 0.5% in 2025. Some countries, like France and Spain, would face more significant consolidation efforts, while others, such as Italy and Germany, could see their consolidation needs reduced or even eliminated due to NGEU (Next Generation EU) grants.

• Role of NGEU:
  The NGEU program plays a crucial role in easing fiscal adjustment paths. It provides both grants and loans to support investment in climate and digital projects. The impact of NGEU on fiscal consolidation varies by country, with some countries benefiting more from the grants than others.

• Growth and Fiscal Trade-offs:
  The uncertain growth impact of green investments and the risks from climate change create difficult trade-offs for fiscally weaker countries. The authors argue that better regulatory policy and a higher carbon price are essential to incentivize private investment and reduce public costs.

Key Information

• EU Fiscal Deficit:
  The EU fiscal deficit increased from 0.5% of GDP in 2019 to 7.5% in 2021. Public debt to GDP rose from 79% to 94% over the same period.

• Public Investment Needs:
  The EU needs to significantly increase public investment in green infrastructure, with an estimated annual public investment of €100 billion (at 2015 prices) required to meet climate goals.

• Public-Private Investment Ratio:
  The public-private investment ratio for climate-related projects is estimated to be between 1:4 and 1:5, indicating that public funding will remain a critical component of climate investment.

• Tax Policy and Emissions Pricing:
  The authors argue that a higher carbon price and better regulatory policies are essential to make green investments more attractive to the private sector. Current tax policies are not effectively promoting the transition to cleaner energy systems.

• Fiscal Rules and Flexibility:
  The authors suggest that the EU fiscal framework needs to be more flexible to accommodate the necessary public investment in climate action. They argue that the current rules are not well-suited to the unique challenges of climate investment.

• Potential Output and Fiscal Sustainability:
  The authors emphasize the importance of potential output in assessing fiscal sustainability. They suggest that fiscal consolidation should not reduce potential output, and that a growth-friendly approach is necessary to support the transition to a green economy.

Recommendations

• Implement a Green Fiscal Pact:
  The authors recommend the implementation of a "green fiscal pact" that combines better regulatory policies, higher carbon pricing, and more flexible fiscal rules to support climate investment.

• Increase Public Investment:
  EU countries should increase public investment in green infrastructure, with an estimated annual investment of €100 billion required to meet climate goals.

• Improve Tax Policy:
  Tax policy should be reformed to make green investments more profitable for the private sector. This includes a higher carbon price and the removal of distortions in the taxation and subsidisation of the energy system.

• Support Fiscal Flexibility:
  The EU fiscal framework should be made more flexible to accommodate the necessary public investment in climate action. This would allow for more moderate fiscal consolidation and a more sustainable transition to a green economy.