Environment

AXA Chair for a Successful Energy Transition

Mouez Fodha, fanny henriet, katheline schubert

Nationality French

Year of selection 2021

Institution Paris School of Economics

Country France

Risk Environment

Chairs

3 years

A joint research partnership between AXA Investment Managers, the Paris School of Economics, and the AXA Research Fund.

Without a drastic reduction in greenhouse gas emissions, we will experience a very significant increase in the Earth’s average temperature, which will entail considerable risks. These risks include the economic costs resulting from the damages that will gradually surface with the rise in temperatures and the increased severity and frequency of extreme weather events related to climate change. These costs can lead to very significant physical and financial losses. Moreover, they may result in population displacement, which may lead to social conflict. This emergency requires major structural changes with a preliminary transition phase that not only involves rethinking our energy choices, but also our current institutional, financial, budgetary, and political structures. The obstacles to a rapid transition are massive.

For a long time, the carbon tax has been seen as the ideal solution to solve the climate problem. Yet emissions continue to rise, and attempts to implement a binding climate policy based on a carbon price face social and political constraints. Climate policies will likely need to focus on instruments other than simply taxing carbon emissions.

Without a price on carbon, or with a price that is too low, to which sectors should investments be directed? In return, how do these investments interact with the more conventional climate policies already in place? Answering these questions is complicated because of the many technological and political uncertainties.

Led by Prof. Mouez Fodha, Dr. Fanny Henriet, and Prof. Katheline Schubert, the research project will carry out the ambition of deepening our understanding of the conditions necessary for a successful transition to a net-zero carbon world for businesses and households. The aim is to better understand the scale of the reallocation costs of this transition, to assess their impacts in terms of stranded assets and green investments, to draw up macroeconomic scenarios of the transition and their consequences, including the social and political acceptability of climate policy instruments.

The project will combine theoretical analysis of mechanisms and simulations with empirical analyses based on historical data. In addition, in order to study individual preferences, surveys and experiments will be carried out, for example, to better understand individual preferences in terms of instruments, the reasons that push them to reject carbon taxation, and the link to trust in institutions.

February 2022

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