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Mr. Olivier J Blanchard

sustainability But they will do so at the cost of constraining fiscal policy when it should not be constrained. Most observers agree for example that fiscal consolidation in the European Union in the wake of the global financial crisis, a consolidation triggered by the rules, was too strong and delayed the EU recovery. And do not ask me for a complex rule. It will never be complex enough. The history of the EU rules, and the addition of more and more conditions to the point where the rules have become incomprehensible but are still considered inadequate, proves the point

International Monetary Fund. European Dept.

framework is adopted to evaluate green financial products, staff advised that it might be preferable to incentivize green investment through transparent fiscal subsidies that would apply equally to self- or credit-financed investment. Average Effective Energy Tax Rate, 2019 (Percent) Source: OECD. 30. The EU Recovery and Resilience Funds can play a key role in supporting the recovery and economic transformation . The timely implementation of the above reform package, with a focus on leveling the playing field for SMEs and improving governance and

Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender
This paper aims to contribute to the debate on the choice of policies to reach the more ambitious 2030 emission reduction goals currently under consideration. It provides an analysis of the macroeconomic and distributional impacts of different options to scale up the mitigation effort, and proposes enhancements to the existing EU policies. A key finding is that a well-designed package, consisting of more extensive carbon pricing across EU countries and sectors, combined with cuts in distortionary taxes and targeted green investment support, would allow the EU to reach the emission goals with practically no effects on aggregate income. To enhance the social and political acceptance of climate policies, part of the revenue from carbon pricing should be used to compensate the most vulnerable households and to support the transition of workers to greener jobs. A carbon border adjustment mechanism could complement the package to avoid an increase in emissions outside the EU due to higher carbon prices in the EU (“carbon leakage”). From a risk-reward perspective, the benefits of reducing the risk of extreme life-threatening climate events and the health benefits from lower air pollution clearly outweigh the costs of mitigation policies.
Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender

, public investment is warranted to improve infrastructure including public transportation networks and electricity grids, research and development (R&D) support is needed to boost research in low-emission technologies, and the development of a robust green taxonomy would foster green financing. The EU recovery packages, which already have a strong green focus, should integrate these priorities.

Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender

roughly 20 percent of total ETS revenue). The Green Deal also includes the creation of an enabling framework for sustainable investments and support to areas facing challenges from the transition toward the green economy. The Just Transition Mechanism (€143 billion) will focus on the most affected regions, helping to create jobs through job-search and training support, but also help finance projects, including renovation of buildings, renewable energy, district heating networks, and sustainable transport. The Green Elements of the EU Recovery Plan The proposed