Christian Gollier: ‘Only CO2 tax can save the climate’
“Politicians don’t dare to tell the truth: the battle against climate change will make a demand on everybody’s purse. Only a CO2 tax can save the climate.” These are the words of Christian Gollier, an influential Belgian economist with an international reputation, and author of ‘Le climat après la fin du mois’ in an extended interview with De Tijd. Gollier is director of the Toulouse School of Economics in France, he founded together with Nobel prize winner Jean Tirole.
Gollier’s basic idea is that people only change their behavior if the economy – and particularly price-fixing – changes. According to the economist, this means that the battle against climate change will only become effective if we will all be confronted with the cost of it. “And this will only happen when we introduce a CO2 tax.”
The problem is that politicians and the green movement are afraid to announce this inconvenient message. “We have to face facts, but the only thing I see is ostrich policy,” Gollier says. “Everybody agrees that climate change is a serious problem but nobody seems to have the slightest idea how to solve it. And this leads to tension and frustration in society.”
To reduce CO2 emissions, we will have to introduce changes in several fields. The agricultural sector needs to be reorganized, production processes have to change, production chains need to become shorter and more local… And all those changes will have to be coordinated one way or another.
The only way to do that, according to Gollier, is to introduce a CO2 tax. People have to be sensitized according to the principle that the polluter pays. Not meant as a punishment but as an encouragement. This way, companies, and consumers will feel the consequences of their behavior.
In his book, Gollier uses a price tag of 50 euros per ton emitted CO2. With an average emission level of 5,5 tons a year, this would lead to a contribution of 275 euros. In the meantime, his calculations have evolved to 70 to 80 euros per ton. And until 2050, this amount would increase by 4% annually.
For many people, this would be unacceptable, and politicians lack the courage to bring this difficult message. Instead, they beat about the bush and only tell people that some products might become slightly more expensive. To compare: the Rutten government in the Netherlands is planning to introduce a CO2 tax of 30 euros per ton.
Vague Green Deal
There is a paradox in the discourse. The public opinion, mainly youngsters, are frustrated because nothing happens, but, at the same time, the major part of the population refuses to contribute to a common approach. “The end of the world can wait; the end of the month has priority,” Gollier says.
Even the Green Deal, which has to make Europe climate-neutral by 2050, is not very specific. Due to the corona health crisis, the matter is even swept under the carpet. Urgent issues are shoved aside by long-term challenges, while the solution is to be found in a combination of short-term and long-term thinking.
Today, visions about energy and energy prices differ. Some economists, engineers, or futurologists are convinced that the energy we will produce by 2050 will be cheaper than today; others say that CO2 will cost us 775 euros per ton to save the climate. The problem is that nobody knows how reality will look like.
“For the business world, this uncertainty is the main reason to postpone investments, and this exactly why I would suggest putting a minimum price on CO2. It will accelerate the transition to a carbon-neutral economy.”
The corona crisis required all attention and suddenly, there were a lot of other priorities like the economy and health care. “Still, the corona crisis also had a positive side for the climate. Not only because CO2 emissions went down during the lockdown, but also because people realized that on’s fate partly depends on others. So, a ‘laisser-faire’ attitude is unacceptable.”
When the corona crisis broke out, the government took drastic decisions and people put up with them. Unfortunately, the situation is different when it comes to climate problems. The effects of measures taken now will only be visi,-ble over one hundred years. And many are not willing to make those sacrifices.
Does that mean that the solution for global warming will be economic, or will not be at all?
Gollier: “Why are American cars twice as heavy as European cars? Because fuel in Europe is far more expensive. So, we, in Europe, have learned to live with expensive fuel prices, and we adapt our purchase behavior when we buy a new car. So, yes, our lives are fundamentally dominated by prices and we gear our behavior with them.”
Christian Gollier (59) is an internationally-renowned professor of decision theory under uncertainty, with applications in climate economics, finance and cost-benefit analysis, and a special interest in long term (sustainable) effects. He is a fellow of the Econometric Society and received an ERC Advanced Grant in 2011.
He founded the Toulouse School of Economics alongside Jean Tirole, where he has served as director (2007-2015), vice-president (2017), and director again since December 2017. He is currently president-elect of the European Association of Environmental and Resource Economists (EAERE).
In recent years, he has held visiting sabbatical positions at Harvard (2013) and Columbia (2015-2016). He has published more than 100 articles in top journals in economics, is one of the lead authors of the last two IPCC reports, and is the author of several books published by MIT Press, Princeton University Press, and Columbia University Press.
His most recent outreach book in French (Le climat après la fin du mois, PUF, 2019) on the importance of acting to mitigate climate change, has met with wide success in France and is currently under translation into English.