The energy transition is now at the heart of concerns in Europe, as the continent commits to carbon neutrality by 2050. This ambition requires achieving net zero greenhouse gas (GHG) emissions, and is essential to meet the commitments made in the Paris Agreement.
The European Union: an action plan and an ambitious strategy
One of the major challenges of this transition is the decarbonization of production processes. Indeed, brown capital, represented by obsolete infrastructures and technologies, emits significant quantities of CO2. It is therefore crucial to replace it with green capital, free of carbon emissions.
Speed of substitution: a determining factor
A key question remains: how fast will the substitution between these two types of capital be? A rapid substitution would lead to a significant slowdown in emissions, facilitating convergence towards the target. On the other hand, a transition that is too late would lead to a brutal adjustment, prolonging the period of high GHG emissions.
The importance of stranded capital
It is capital that loses its usefulness as the transition progresses. Thus coal-fired power plants must disappear to avoid further fuelling emissions.
A revealing study
INSEE modeled these different elements based on several GHG emissions trajectories. These trajectories vary from simple convergence towards neutrality in 2050, to the implementation of a policy of reducing emissions by 55% compared to 1990, to an even more ambitious strategy of reducing emissions by 90% by 2040. Finally, the authors consider a carbon budget that should not be exceeded.
The latter trajectory is the most efficient with an immediate substitution of green capital for brown capital, enabling a rapid reduction in emissions and thus facilitating the transition to carbon neutrality. This approach entails a high cost from the start with a high stranded capital.
The cost of inaction
Conversely, the less restrictive a trajectory is, the more substitution efforts are delayed, which harms general well-being. Nicholas Stern had also underlined this in his 2006 report: the longer we delay adapting, the more costly the process becomes. The urgency to act therefore becomes evident.
A crucial choice: today or tomorrow?
However, this dilemma between acting today or postponing until tomorrow remains complex. How much are we willing to sacrifice our present to ensure a sustainable future? Too much preference for the present could have catastrophic consequences for future generations. This delicate trade-off is manifested in the political decisions we are making today.
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