Book Club

The Chair read for you Le climat après la fin du mois by Christian Gollier

Published on 13 July 2022

Christian Gollier holds the annual chair “Avenir commun durable” at the Collège de France and is Director General of the Toulouse School of Economics which he co-founded with Jean Tirole. He was president of the European Association of Environmental Economists and one of the main authors of the IPCC report published in 2007. His latest book, Le climat après la fin du mois [1] (2019) which we can translate as “the climate once the month is over”, is both a scientific popularisation book and a political proposal: that of a carbon tax set at 50 euros per tonne. This book came out shortly after, one might even say in response to, the Yellow Vest protest movement that spontaneously emerged in France following the increase in the domestic consumption tax on energy products (TICPE) at the end of 2018. Its title is inspired by various slogans from the Yellow Vests movement such as “the elites talk about the end of the world, when we talk about the end of the month” or “end of the world, end of the month, same fight”.

Christian Gollier is a major carbon tax proponent, which he presents as a consensus among economists. Le climat après la fin du mois therefore begins logically with the reasons why we would need such a tax. Like a Pigouvian tax, the carbon tax responds to the need for the internalization of the social cost of carbon-emitting economic activities. This is because negative externalities are currently insufficiently taken into account in the economy. The carbon tax would thus make it possible to send out a price signal that could lead to changes in consumption patterns and lifestyles that would be commensurate with today’s climate challenges. Christian Gollier’s arguments also reveal a distrust for climate policies that he deems too coercive and conducive to authoritarian excesses, as well as a pessimism regarding the capacity of democracies to take into account the interests of future generations (who are logically absent from the negotiating table). Christian Gollier also attacks the speeches made by political leaders and part of the media, according to which the ecological transition could be achieved without sacrifices from the consumers. In his view, this leads to the paradoxical situation where, at a time when the Yellow Vests were protesting against the increase of the TICPE, four associations were attacking the French state for inaction in the fight against climate change. In response to the author, one could point to polls suggesting that the majority of French people are ready to act in favor of the environment, but on the condition that efforts are fairly distributed.

In addition to sending a clear price signal and being part of an intuitive “polluter pays” logic, the carbon tax also has many other qualities according to Christian Gollier. On the one hand, because it focuses solely on emissions (and therefore on environmental damage) and does not address usage, it is not a liberticidal or paternalistic tool. Its universality would also have the virtue of making society as a whole pay only for the necessary sacrifice to ensure the ecological transition, where other less effective mechanisms are unnecessarily costly. For example, the introduction of regulations or more targeted mechanisms often means paying a very high price per tonne of avoided CO2. In France, for example, the agricultural sector is virtually exempt from a carbon tax, while the obligation for EDF to buy back surplus green electricity, or the “bonus malus” in the automobile sector, result in a de facto carbon tax well above €50 per tonne. Although more discreet, and therefore more easily accepted, these mechanisms nevertheless end up being financed by taxpayers who ultimately pay more than would be necessary to achieve a similar result in terms of reducing greenhouse gas emissions. Moreover, the carbon tax would make it possible to avoid generalised sobriety, by making only the consumption of goods and services that generate negative externalities more parsimonious. Finally, to guarantee the egalitarian nature of the carbon tax – and therefore indirectly its social acceptability – redistributive measures can be implemented with the revenue from the tax, like an energy voucher. However, for reasons of efficiency, it is important that these redistribution mechanisms are independent of the carbon tax and are not limited to the financing of a targeted category of consumer goods.

The cost of €50 per tonne of CO2, which is rather opaque for most of the book, is explained in the final chapters. The author takes time to detail the ethical and technical considerations behind such a figure. An important factor is, for example, the moral weight we are willing to give to future generations. Similarly, the question arises of how to balance the costs of today against the benefits of tomorrow, so as not to do ‘too much’ for future generations at the expense of humans alive today. To this end, Christian Gollier presents the Ramsey equation, which is an ethical rule for calculating an interest rate based on preferences for the present, economic growth, and an aversion to inequality between generations. Unsurprisingly, this carbon price may change depending on the assumptions and trade-offs made. An important point, however: Christian Gollier specifies that the €50 price level presented as a reference throughout the book must increase over time for several reasons, in particular the exponential growth of climate damages and the gradual distribution of the effort. The “Quinet 2” report on French climate policy thus recommends a price of €775 per tonne in 2050.

In order not to limit his proposals to the French context, and after a brief reminder of the successive failures of the COPs, Christian Gollier turns to the issue of international cooperation on climate. He takes up William Nordhaus’ idea of creating a coalition of voluntary countries ready to introduce a common carbon tax. The establishment of this coalition would be accompanied by significant import tariffs for countries outside the coalition, in order to encourage them to join (and thus adopt a carbon tax) while reducing the effects of potential environmental dumping or a lack of competitiveness linked to the carbon tax. Such a voluntary coalition would have the advantage of not having to rely on the goodwill of Russia, Saudi Arabia, or other countries that traditionally tend to derail international negotiations through lack of commitment. Although there are some difficulties that could prevent this from happening, including the WHO’s opposition to the introduction of such tariffs, Christian Gollier argues that it would be feasible.

Overall, The Climate After the End of the Month is a compelling and comprehensive case for a universal carbon tax. Indirectly, the book also highlights how ‘orthodox’ economics can respond to climate issues, even though it is often accused of being blind to environmental issues. Nevertheless, Christian Gollier could be criticised for a lack of arguments concerning the capacity of the carbon tax to ensure that warming is limited to below 2°, as well as the way in which it can be made fair and politically viable.

Tom Bry-Chevalier, PhD student, Economic challenges of cultivated meat as a disruptive technology in the face of climate change.

[1] Gollier C.,  2019, Le climat après la fin du moisEdition PUF.