Energy transition, water management and biodiversity preservation all require renewable energy production facilities; the thermal renovation of housing and other buildings; industrial and transport decarbonization; more efficient management of water consumption; and arrangements and measures for protecting or preserving a sufficient number of plant and animal species.
We know more or less how much additional investment is needed to meet these three objectives. With regard to the energy transition, estimates by Selma Mahfouz and Jean Pisani-Ferry suggest a net additional investment requirement of 2.5% of GDP per year ($2.5 trillion per year worldwide). According to available studies, water-related investments amount to $350 billion a year (or 0.35% of global GDP).
The global agreement on biodiversity (Kunming-Montreal agreement, 2022) provided for $200 billion a year in national and international funding, but, according to the Paulson Institute, this should be increased to $800 billion in annual investments (instead of the current $140 billion). Finally, to these sums must be added the public expenditures linked to preserving the purchasing power of the most modest households, which will be severely affected by the rise in energy and water prices.
If we devote 0.5% of GDP to this support, investment expenditure linked to the ecological transition should represent around 4% of GDP per year for at least 20 years, divided between public and private investment, by businesses and households alike. How can France finance this?
The first possibility is by increasing foreign debt. But France already has a current account deficit of 2% of gross domestic product (GDP). That is to say, it borrows 2% of GDP per year because domestic savings are insufficient to cover its investment needs. This would have to be increased to 6% of GDP to cover all of the additional investment required for this transition. This foreign deficit would be extremely difficult to finance: it could trigger a financial crisis of the kind that hit the southern eurozone countries from 2010 onwards.
Reducing consumption
What's more, every country will be faced with the need to invest in this transition, and will need more investment: this means that there will be a "war" for access to funds, and therefore a great deal of competition to attract foreign capital. It's not certain that France is attractive enough to draw in a lot of extra foreign capital in a world where savings have become scarce. It therefore doesn't seem possible to finance additional investments through foreign debt.
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