The reflection on what a macroeconomist should be today continues. Tomorrow’s macroeconomics will be conditioned by the need to converge towards carbon neutrality. This is the only reasonable hypothesis that indicates that the world will no longer emit carbon in order to no longer fuel the greenhouse effect to feed global warming.
Doing nothing is also an option, but then, with the temperature rising to 3 degrees above the pre-industrial average, the consequences on the population, agricultural production and the rest would be difficult to sustain.

Let us focus on neutrality because the road ahead is still very long and very chaotic.
Several remarks
1- The philosophy of the economy is changing. It is no longer driven by exchanges and enrichment but by the awareness that resources are finite.
2- The world was organized around fossil fuels, we will have to get rid of them and learn to operate with a less efficient energy system. The stakes are high because the consumption of fossil fuels, oil, gas and coal will have to be reduced by 70 to 80%.
3- Nuclear energy will be insufficient to compensate. It represents 5% of primary energy consumption. It will be necessary to resort to renewable energies.
4- While fossil fuel operators are known and established, this is not yet the case for many raw materials. This will result in races for exploitation and a renewal of the geopolitics of raw materials.

By posing these elements, we quickly enter into a non-cooperative logic and a balance of power. We leave the logic of exchange to enter into the appropriation of resources. This then enters into contradiction with the convergence towards a point in the future whose achievement should reflect cooperative behavior. For the economist, this is a form of impossible diagram.

This suggests that there will be no smooth transition without disruption. This is why the carbon tax is a necessary but insufficient tool. The carbon tax assumes that it will be sufficiently restrictive to permanently alter behavior, particularly in the consumption of fossil fuels, but that powerful redistributive mechanisms will limit its impact on overall demand. This will not be enough.

If there are breakages, they can come from different sources.
1- Consequences of the new geopolitics of raw materials
2- Less cooperative behavior of States in a world perceived as finite. The State finally becomes strategic while it knows that it is less effective.
3- Production processes reflect a form of coordination between the different stages of production. This mechanism will be altered, in particular because of the two previous points.

To be continued tomorrow in “Being a Macroeconomist Today Part 2”…