Climate policy is macroeconomic policy, and the implications will be significant

Policy Brief
21-20
August 2021
Photo Credit: 
REUTERS/Ina Fassbender

For all the long-term benefits of urgently addressing climate change, economic policymakers must plan for a challenging transition to carbon neutrality. Pretending that the costs will be trivial is dangerous. Estimates by the Intergovernmental Panel on Climate Change of the United Nations indicate that emergency action is indispensable to limit catastrophic climate disruption. Because of the magnitude of the efforts involved and the pace of the transformation implied, the accelerated transition to a carbon-neutral economy is bound to have serious, immediate economic implications, warns Pisani-Ferry. Some equipment will lose economic value. Some plants will have to close. Employees will have to be reallocated to other occupations. Investment will have to increase, to repair or rebuild infrastructure and the capital stock. He argues that so far policymakers have not addressed these implications in a systematic manner. It is high time policymakers realize that climate policy is also macroeconomic policy and design transition strategies now.

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Jean Pisani-Ferry Senior Research Staff

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