Interview: Patrice Geoffron, Professor of Economics, Paris Dauphine University.

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An Economics Professor’s perspective on The Real Cost of Climate Change.

The data presented in KISTERS‘ Real Cost of Climate Change report is a starting point – a snapshot to start a conversation. The report reflects what the data tells us at this point in time, which is why we are digging deeper into the intricacies of the story behind the numbers. Working with some of the world’s leading economists and climate change experts, we aim to further analyse the data, uncover nuanced insights and explore the many dimensions of the financial impact of climate change.

In this exclusive interview, we delve into Patrice Geoffron’s valuable contributions to the fields of economics, energy, and climate research.

About Patrice Geoffron:

Patrice Geoffron is a renowned economist specialising in energy and climate research. Patrice serves as a professor of economics at the prestigious Paris-Dauphine University, leading their energy-climate research team. Patrice is an influential figure in the industry, holding positions on a number of key scientific boards, including the French Atomic Energy Commission, the Engie group, and the French Energy Regulator. Patrice’s global influence is evident through his membership on the world board of the International Association of Energy Economics.

Additionally, Patrice collaborates with esteemed foreign universities, such as Bocconi University in Milan, and advises numerous companies on decarbonisation strategies.

THE INTERVIEW:

KISTERS:

Given your expertise in climate economics, how do you foresee the escalating costs of natural disasters impacting the global economy in the next few decades?

Patrice Geoffron:

We already know that, even in the best-case scenario (i.e. implementing policies that keep the rise in temperature “well below 2°”), climate disruption will continue to grow for decades to come. It is also clear that the least developed regions of the world, which have the least historical responsibility for greenhouse gas emissions, will also have fairly limited capacity to adapt (and less opportunity than elsewhere to cover some of these risks through insurance mechanisms). This configuration will lead to both direct effects that increase over time and indirect effects that are very difficult to determine precisely (geopolitical crises, migrations, …), but potentially on a large scale.

KISTERS:

How important do you find the role of data in shaping our understanding and response to the economic impacts of climate change?

Patrice Geoffron:

The role of data is essential: given that the Paris Agreement is based on voluntary commitments, it is essential to be able to establish reporting that was as accurate as possible. Otherwise, the overall trajectory will be impossible to establish and the system will unravel. This data is also essential for measuring how companies are meeting their commitments to their stakeholders (on all the “scopes” of their carbon accounting). In particular, progress in satellite observation is an undeniable asset, and can also be used in offset strategies to ensure the preservation of forest areas and biodiversity. In addition, of course, this data is essential for balancing more complex electricity systems (via smart grids) as a result of the deployment of renewable energies, electric vehicles, etc.

KISTERS:

In your view, is it possible for countries to balance economic growth with the need for sustainable practices in light of increasing climate-related disasters?

Patrice Geoffron:

Such a balance can be achieved if collective efforts enable to stay within the range of 1.5°C to 2°C. Otherwise, extreme climate phenomena could accelerate (the now famous „tipping points“), taking us into an unknown zone.

KISTERS:

Our report suggests that developed countries like the USA and the UK will face significant economic challenges due to climate change. Could you elaborate on the vulnerabilities and resilience capacities of these economies?

Patrice Geoffron:

Symbolically it is interesting to note that these two nations (which were world leaders in the 19th and 20th centuries) cannot be invulnerable. Of course, their territories are not immune to the effects of climate change (and this is already the case for the United States, in particular). But, once again, the threat seems to me to be above all the indirect effects of climate change: the political systems of these two countries have been seriously destabilised by the problem of migratory flows, which are already linked to climate change and will continue to increase if implementation of the Paris Agreement fails.

KISTERS:

Can you elaborate on how Germany, as an industrial powerhouse, is navigating the economic challenges posed by climate change?

Patrice Geoffron:

The effects of combating climate change are a source of great uncertainty for global growth: Germany is heavily dependent on international trade, and is therefore particularly sensitive to the erratic growth that is bound to occur if the climate is further destabilised. In addition, it turned out that Germany had both an unsustainable energy system and a complete decarbonisation strategy, as we saw in 2022.

KISTERS:

With your research focusing on smart cities and low-carbon energy transition, what role do you see these technologies playing in mitigating the economic impacts of climate change?

Patrice Geoffron:

With more than half of the world’s population living in cities since 2005, there is a need to optimise the delivery of essential services in the most resource-efficient way (energy, water, transport, etc.). But we must also be wary of „techno-solutionism“, imagining that progress will be a universal and guaranteed source of solutions. Drastic sobriety efforts will also be essential.

KISTERS:

What changes or adaptations do you believe are necessary in current economic models to accurately account for climate change impacts?

Patrice Geoffron:

It is difficult to propose a generic answer to this question. One recommendation, however: companies should aim for resilience, which means first of all implementing projects that are robust in the face of changes in public policy (the largest groups generally use an „internal carbon price“ for this purpose); they should also check that their value chain is not at risk of being interrupted by extreme climatic events.

KISTERS

Based on your expertise, what key policy recommendations would you give to global leaders to effectively address the economic challenges posed by climate change?

Patrice Geoffron:

We need to act now. The world’s biggest emitters have announced their desire to be carbon neutral in a few decades‘ time, but this only makes sense if public policies, in the short term, lead to a reduction in emissions now. This is not the case, or it is not happening at the right pace. This is the challenge facing Europeans with Fit for 55: to align the short term with the long term.

KISTERS:

How critical is international collaboration in addressing the economic impacts of climate change, and what form should this collaboration take?

Patrice Geoffron:

It is essential, and that is the purpose of the COPs. However, from a European perspective, it is important to move forward no matter what, even if international cooperation proves insufficient: Europe imports a massive amount of oil and gas, and we cannot remain so dependent, as we found out the hard way in 2022 (with a collective cost of around 700 billion euros in shields and shock absorbers). In other words, Europe must move forward quickly, whatever the others do.

KISTERS:

What lessons can we learn from historical data on climate-related disasters that can help better prepare global economies for future challenges?

Patrice Geoffron:

Naturally, this data is essential for understanding the diversity of climate impacts. However, we must be wary of “tipping points” that are not necessarily already recorded in the historical data. Acting quickly in the face of these uncertainties is therefore part of the precautionary principle.

KISTERS:

How do the economic impacts of climate change differ between developed and developing countries, and what implications does this have for global economic strategies?

Patrice Geoffron:

Naturally, developing economies are more fragile: in terms of their institutions, infrastructure, health and insurance systems, etc. But their limited development also means that they have emitted few greenhouse gases in the past. All this is fundamentally unfair. This is why it is essential to raise the funding provided for in the Paris Agreement (100 billion dollars per year) and also to raise funds to cover losses and damage (as envisaged from COP 27 onwards).

KISTERS:

How can predictive analysis and modelling help in preparing for future economic scenarios related to climate change impacts?

Patrice Geoffron:

The production of scenarios is essential to guide the actions of stakeholders, whether public institutions or businesses. But it is only of value if it is updated on a very regular basis, given the uncertainties in so many areas. It is for this reason that in the IPCC reports, each result put forward is associated with a degree of reliability, so that the degree of robustness can be shared transparently.

KISTERS:

What are your key takeaways from KISTERS‘ climate change economic report?

Patrice Geoffron:

This report seems to me to be of twofold interest: to show that climate change has already set in (in line with what the IPCC is also telling us in its series of reports between 2021 and 2023); and that even the most advanced nations are not and will not be exempt. Nevertheless, the reasoning proposed in the report, comparing the direct costs of climate change with macroeconomic variables (GDP, public budget, etc.), seems to me to be an interesting way of informing the debate and sounding the alarm. However, my perception is that the macroeconomic impact of climate change will become massive, and plausibly well before the horizon that appears in this report.

End.