 School of Economics and the Director of the University at EDF. So I have my two bosses next to one another, Jean with my boss at TSE and Mr. Lévi with my boss at EDF. I'm delighted to host this roundtable on the future of the electricity industry and especially the question we'd like to ask our panelists is around public policies and what kind of public policies will be needed to support and accompany the energy transition. So we have four panelists, you probably all know Jean Tirol who is the leading economic theorist in the world and certainly in France and is very modest about that. Dick Schmalenzi is a professor at MIT, he's a distinguished professor, he's actually one who taught industrial organization to Jean when Jean was a student at MIT. And in addition, Dick has also served in the Council of Economic Advisers to the Bush government. So he has both an academic experience but also a public policy. Bush one, Bush one, Bush one. Well, you're so young, you know, you may have been Bush. So he has also a public policy experience and he is among the ones who designed the sulfur market in the US, a very successful experiment that he ran. Jean Bernaliveau of course is president of EDF and before joining EDF, he has worked in the government and in other industries. So he brings both an electricity expertise but also an expertise of having to design regulations and public policy but also having worked in other industries. And Philippe Soquet comes from Total where he's running both the renewables business, the energy and gas business for Total. So a very growth oriented business but he's also running strategy and innovation and Total of course is a new entrant in the electricity industry. So we go for both the academics, the practitioners and the trials and that should give us a very lively debate. As with the first one, about 10-15 minutes per person and after that I will open to questions from the floor. We'll probably start with you Jean and then Dick and then Jean Bernal and then Philippe. Okay, thank you Thomas Rivier. I'll just set the stage actually the important stuff will be the next three talks and I'm just going to introduce a topic, nothing very new that you'll be surprised of, especially Christian Golié was sitting there. Actually we have been writing together on a topic in the last few years. As you know carbon, the carbon issue is really two issues. One is free riding, simply the fact that we like other countries to do the effort a country is going to bear 100% of its cost and of course get only a small fraction of the benefits so if you are one person of the population and say your damage are kind of proportional as well then you get one percent of the benefits of your investment. It's a little bit as if basically I told Jean Bernal for example you invest 100 and then 99 will go for me and on my savings account and one would go, one euro would go on two, your savings account, are you willing to do it? Maybe you might but certainly most people will not and so the first issue is free riding is a clear thing and the second one of course is selfishness with respect to future generations which of course do not vote and therefore we are too selfish as well. Now as most of you know I have been very critical of COP21 actually I wrote an op-ed the very day it came too close but nonetheless COP21 has the right diagnosis the fact that warming should stay below 1.52 Celsius and then we should not produce net emissions after 2050 and then we should have a green fund of over 100 billion dollars per year which was fixed in Copenhagen even so that the right diagnostic is not that different from what was decided in Rio in 1992 in a sense the big difference is of course that it was signed by 196 countries and I will come back to this point. Now the Guardian just the day so I think that was the day of the agreement said by comparison to what it could have been it's a miracle by comparison to what it should have been it's a disaster and I think it's a good summary of COP21 and there are lots of things missing in COP21 the most obvious thing for all of us in this room I guess most of us would be carbon pricing which is recommended by a vast majority of economists and many policy makers but of course it's a no starter for Venezuela and Saudi Arabia so you already know that if you get something signed by 196 countries by every country there won't be much in the agreement and the proof of that is that all heads of state went home to celebrate the agreement but none of them informed their compatriots that they had to roll up their sleeves and go to work because the AR of cheap pollution was over for the country so nobody came back home and said now we have to spend money to fight pollution and that's remarkable if you think about it that everybody was celebrating the agreement and that's the best proof that actually there was not that much in the agreement we have a pledge and review process I don't want to throw the stone to people who negotiate I mean it was a difficult thing to negotiate for sure but I think we are going to talk a lot about political economy because that's the most difficult thing it's not so much how we should reach a goal it's how we can agree on a real agreement that's going to be the thing so I think Dick is going to talk about that but clearly even if we have trust in the promises and those are trust promises it's not a binding agreement it's not going to be enough and it's a carbon pricing system which is differentiated among countries so it's implicit carbon pricing with different prices in a sense for different countries which opens a Pandora's box so it's not clear where this is going and we all know that future emissions will come mainly from developing countries the idea that we are going to fight climate change by not having a price in developing countries is just a big mistake what we have to be is to be generous with developing countries but not have a zero price or low price in developing countries because that's the best way to ensure that there will be global warming beyond reasonable level let's forget about leakage even without leakage and of course if we have a serious price in developed countries then the leakage will mean that the production of many things will remove which hasn't re-appened yet will remove to other countries now same issues with fairness our agreement is not fair we have promised 100 billion dollars over that but of course there is no commitment it's just a collective pledge which was respected of course nobody feels responsible for good reasons and I can understand the southern countries so it has to be a quick pro quo in a sense less developed countries have to pay a carbon price a sizable carbon price and then we transfer money to them but we have to explain who is going to pay what now there are reasons for optimism after all many countries including big countries have cap and trade systems we have seen the resistance to Trump last week in the US and it's easy to resist Trump abroad but in the US there's been a fair amount of resistance which is a good news and that raises a question of both the design of the agreement of I don't know COP26 27 but also we should proceed so I think a vast majority of us will be in favor of carbon pricing against common and control for the usual reasons I think also there will be if I had a poll in this room there will be a lot of disagreement on whether we should do that through a carbon tax or a cap and trade probably 50-50 in this room my own view is on cap and trade because I think it's very hard to implement a carbon tax for three reasons first there's the issue of collection you have to monitor collection so the states today, the countries today could already collect a carbon tax they don't do it so tomorrow when they will be committed to a carbon tax they could close their eyes and they will have the money to check that this carbon tax is being paid by their companies or their citizens and we see what's happening to Greece even so you have the Troika in Greece and you still have a hard time collecting the taxes so I'm very pessimistic about that then there's the issue of upsetting measures so you can raise a carbon tax but then you can actually lower other taxes on fuel for example actually that's what we did in France in 2015 that's through a reduction in other tax and there is no effect and then there's the issue of all these actions which don't have a carbon price how do you deal with R&D publicly funded R&D with startups, with land use, agriculture how do you deal with that what kind of price do you put on that it's a little bit easier with cap and trade because with cap and trade you can start from a carbon budget then have cap and trade program and then make countries themselves accountable for their emissions it's slightly easier to measure actually emissions at a country level than at the local source emulation level so and on top of that you could give some subsidiarity to countries that's a possibility so basically the countries will be available for that you have to pay attention to market power there are various interesting issues there but I would say this is second order we could have our disputes about whether we should have cap and trade or carbon tax you're compared to what's happening now it's completely second order it will become first order hopefully soon but for the moment it's... but then there are difficult issues and the difficult issue of course is how do we organize a negotiation how should we enforce a deal if there's a deal so my own view actually that was my view before the Trump election I don't know where I stand anymore but my view was that we should take the largest 5 or 10 emitter and build a coalition then we'll control the WTO and then we'll impose some ugly border adjustment tax which I don't like you have to use whatever pressure that you have to use and then I will also if we go for a cap and trade system use the IMF after all if you don't have enough pollution permits it becomes a debt when you convert to the market price for permits and that should be increasing national debts and after all most countries pay their national debt so why don't you add that to their national debt but then you need the IMF to be part of it I don't know I mean it's not an easy thing to do I don't have any easy solution and then we have to confront equity so at some point we have to say France is going to pay X to less developed countries the US are going to pay Y and so on because I just don't see how collective promises will work so let me conclude here I just say the first is that we need to make the negotiation simpler in one dimension which is we know how to do it it's not an economic prime so to speak we need a carbon price in some way and we can have our disputes about this way but we need a carbon price at some point and some objective which is going to keep us within 1.5 Celsius and then we need to set up an independent infrastructure that monitors emissions of countries make countries accountable find ways of enforcing the agreement and I recognize it's not an easy thing to do because we don't have gunboat diplomacy anymore when a country doesn't repair or doesn't emit too much and then we have to confront the equation of equity so here it's just setting the broad stage and then you're going to get the real stuff now Thank you Sure Paul Samuelson was once told our famous economist was once told by an acquaintance that economics is easy you could teach a parrot to say supply and demand and Paul is said to have replied there are lots worse things you could teach a parrot so I'm going to say carbon price but I'm going to say it I hope in a slightly different way let me first react a bit I hate to disagree with Jean but let me disagree with him a little bit on some things I thought that COP 21 was a great step forward the Manchester Guardian had it exactly right of course compared to what it could have been it was a triumph compared to what it should have been it was a disaster but I was very critical of Kyoto which was a different approach to the problem Kyoto said we rich countries will impose large costs on ourselves and after a while the rest of you will want to join in that's a deep versus wide approach let's just go deep with a few of us and then try to widen the club who would want to join the club Paris by contrast is what I have called a wide then deep approach let's just try to get a lot of people in the tent do what we can do which is pledge and review we have yet I think to establish an effective review mechanism pledge and review and then try to move in Jean's direction I think that's more promising than going back to the Kyoto style approach let me agree with him on tax versus cap and trade I must say in the US the majority economic opinion of economists is in favor of a tax and that's because most are unfamiliar with what US tax legislation looks like one of the advantages of cap and trade I was involved when we did the sulfur dioxide system in the US there was an enormous amount of dealing people got allowances and credits and special deals with an overall cap so if I give you something extra everybody else ratchets down we kept the cap in place and none of that affects efficiency none of those you get more allowances than the guy next door the efficiency of trading or the efficiency of the outcome or a uniform carbon tax you do that with a tax bill you get a mess you wreck the efficiency of the system and those who think you can write a carbon tax on a single sheet of paper are dreaming at least in the US it will take 50, 100, 200, 300 pages giving exemptions for these people special breaks for those people offsets for these people to get some carbon tax whereas with the cap and trade you have some hope okay let me try to say supply and demand as the parrot did in a somewhat different way and get to a carbon price I'm going to argue that it's time now to start thinking about climate policy decades in the future and what must be done now to make climate policy decades in the future work and I think you have to do that for three reasons first policies last I will go back to the early discussions of the framework convention on climate change I was in the bush 41 administration and let me join the apologies for Trump I need to do that but there was diplomatic chatter before the first negotiating session and to remind you President Bush 41 hosted the first negotiating session for the framework convention imagine that but what we got from Europe in the way of proposals was let's mirror the way we do environmental policy domestically let's negotiate an international standard for automobiles let's negotiate an international standard for power plants and as we said let's have a toaster protocol we had just done the acid rain bill we said we have a better approach let's have international limits on emissions we care about emissions we don't care about grams per kilometer we care about emissions and of course make them tradable now we won half that battle because all the discussion since has been about national emissions not about efficiency standards I think that will endure that's what I call a policy architecture an approach to how a policy problem is defined it's now defined in terms of national emissions which lends itself to cap and trade so decisions we make about policies today are likely to be around in 2050 think about policies you know, love and hate and they last decades the other reason is the problem is going to get harder we all talk about zero emissions by 2050 well my golly that's not just putting up some more windmills that's not even just decarbonizing electricity which is less than half of global emissions once you get past decarbonizing electricity and maybe pushing electric vehicles and you say we really have to go to zero the problem is really hard and in a particular way I'll come back to and the third reason you need to think about the long term now is that the harder and more expensive it is to make those last reductions the less likely it is they will be made and I think everybody knows that the effect of a ton of CO2 lasts on the climate lasts well beyond a thousand years so it comes out of the air slowly but its effect remains so if you really want to get to zero you need to think now what policies do we want to deal with maybe hard to deal with them to make it cheaper to get there now I will talk I'm happy to talk about R&D at great length because I think that's essential to dealing with the developing world that's a form of generosity if you can develop commercially competitive technologies and sell it to them you make it more likely that they will reduce emissions I think outright generosity I just think about the US Congress subsidizing China and you can just laugh hysterically at that that isn't going to happen but can we make useful things and sell it to them yeah sure well let's take R&D yeah sure but the policies I want to talk about are the kinds of things that most people have tacked on to policies that would raise a carbon price I'll give our examples I mean California in the US has a cap and trade policy the price of carbon in that plan is at the floor they had the sense to put in a floor it has a floor it's at the floor why is it at the floor well they have a lot of other policies that subsidize renewables they restrict the carbon content of motor vehicle fuels that's a very tightly binding policy what do those things do well they distort the pattern of abatement they change the way people meet the cap and when they are binding constraints they lower the price of carbon now why do we do things like that if we care about carbon why do we subsidize renewables why do we worry about fuels I think there are two reasons and they make these what I'm about to propose to be a difficult problem in political economy some people don't believe in markets it's really important that the transportation sector do its part even if it's more expensive for it to do its part some sense of fairness and they won't act unless we make them so we regulate the second reason is we much prefer to regulate or subsidize good things than to tax bad things who can object to paying a few more pennies in their income tax or their electric bill to have more nice clean photogenic renewables who can object to that that's great stuff even in conservative US states that's popular because everybody loves renewables but the effect of renewables under a cap and trade is simply to raise the cost of meeting the cap and crucially lower the carbon price under the cap and trade lower the allowance price why does that matter well if you take the long run view and you do the easy stuff and the easy stuff is sort of what people have committed to at Paris but it slows the growth that's the easy stuff once you do the easy stuff and you start pushing the system beyond electricity home heating and cooling industrial processes various forms of transportation many diverse sources old homes, new homes large homes, small homes you start trying to do that and the only way that's really going to be workable is to do it with a carbon price and if you put in and are committed to all of these policies that get you a low carbon price you're going to have to try to I say you, I mean all of us are going to have to try to do this by command and control command and control applied to many diverse sources of anything is a catastrophe and you know because frankly we're not spending that much to abate but if we're actually serious as at least a community of wealthy nations absent our president to getting to net zero emissions and we really our democracies we need to get to net emissions as inexpensively as possible and that really means letting the carbon price do the kind of work that only it can do and that really means getting the underbrush out of the way that keeps the carbon price low so I'll stop there but I want to leave you not just with that prescription which I think is actually important but to leave you with the thought that it is not too early to think about the long term policies last the problem is getting harder and the costs are going to matter so to get the costs down we need to get the policies right soon and the fact that everybody loves all these ancillary policies will regulate motor vehicles because the auto companies will pay for that and will regulate fuel because the oil companies will pay for that and will subsidize solar because we love solar because we'll all do that as a matter of political economy it's hard to unwind these policies but in 20 or 30 or 40 years these policies are going to make it very hard to do the emissions cuts we need to I'll stop there thank you thank you Thomas good afternoon to all of you just a few words on EDF and the way we look at of course carbon pricing I noticed the name of this session is supposed to be energy market organization which would lead us probably much beyond the day or the week but just to say a few words about where we stand and how we see the the issue I think we stand well first because we are a large electricity producer and due to very solid and long long view experience and decisions we have been able to deliver to quite a large country which is France a very low carbon power we emit in France only 15 grams of carbon dioxide per kilowatt hour 15 whereas our friends in Germany have emissions of 400 grams 400 versus 15 so it's doable but it's due to good decisions we made several decades ago investment in hydraulic nuclear energy long before any type of carbon pricing and discussion on market design and market organization went so visible especially under Brussels deregulation principles which are probably not easy to align in terms of how you see regulation on the one hand and decarbonation on the other hand nobody really has the answer for this so as a company as we are already very well advanced in decarbonation of our major production this means we have a strategy where we can really focus on our clients which probably for an electricity company is not so usual so we have a strategy we call it cap to 2030 but cap is not a cap against the floor means a target in French but maybe it's a good acronym too and cap 2030 really our priority is to focus on how we can innovate towards our clients and I think what's interesting is that when DQ are very rightly saying that everybody believes all these policies with subsidies and so on it's becoming very popular what's also becoming very popular on top of the subsidies is that the people the real people really enjoy getting control of the electricity bill by having the power generation just on the rooftop and this is very new from where it was a few years ago of course this is due to technology but also it's trendy trendy technologies and people even some people will we will be happy to pay more because they are solar and it's their energy it's not something that just comes out of a plug on the rooftop and we are definitely going to focus on how we can bring our clients the pleasure of becoming energy producer and having more control over the electricity bill even if it's a bit higher than if it wasn't only supported by a very large and mutualized electricity system of course we'll also focus on how we can even decarbonize more and almost all our capex goes towards nuclear on the one hand and renewables on the other hand just let me state once again that we spend the same amount even a little more in growing our capacity in megawatt or gigawatt for renewables then we spend in nuclear whereas we are seen as you know two nuclear for nuclear in fact at least since I joined we now spend a little more in bringing more renewables capacity to the planet what about regulation we would be very happy to support cappa and trade and of course obviously very bold in front of two very expert people I think to my right and to my left but we are very very cautious about supporting cappa and trade solutions versus taxes not that we enjoy taxes please that's not the reason just because we see the cappa and trade system in Europe is really void of any success is really a big failure I don't know how to say it you know it just doesn't work we see that after years where obviously too many ETS too many certificates for emissions have been delivered to all kinds of people who are complaining you know just as you said an exemption for this and give me that and so on we see that there is such an overcapacity of emissions certificates that the price for emitting a ton of CO2 is about today about 15% of what we believe 15, 1, 6 or 1, 7th whatever but we believe should be the price where it would really have any effect on the amount of carbon that is it is emitted and we see on the other hand that in some countries including neighboring countries, Sweden and the UK and let me spend a couple of minutes on the UK we see that some very successful systems have been put in place we are a big producer of electricity in the UK as a matter of fact we are the largest producer of electricity in the UK we are in fact a Franco-British company in some ways and our largest current investment right now is in the UK and we have seen in the UK that they created a few years ago a system where there is a price floor which has been a support a support to the carbon price that is seen on the market which means it is directly not traded by by the producers but directly added to any transaction and the increase to 18 pounds so let's call it 20 to 22 euros of on the carbon price on the carbon market price has led in two years to a reduction from 30% to 10% of the share of coal in the electrical energy mix so the UK which used to be a big coal country is now only a 10% coal country we know Germany is still 45 we know China is still in the 60s to 70 range in France we face the situation where there is no significant advantage given to low carbon electricity production the carbon price is around 4 to 5 euros per ton it means this is not enough to have gas based electricity production more competitive compared to coal based electricity production so we believe it would take a 30 euro price instead of 5 4 to 5 to switch the number of hours of the gas plants and the number of hours of coal plants right now the coal plants will maybe operate let's say 3000 hours per per year and the gas plants maybe only 1000 hours per year it depends on the order of merit of each plant and we would like to switch between 1000 and 1000 hours in average and that would already make quite a difference in the way the system is worked the second problem we have is that with the continuous support to wind and solar farm we obviously have a situation of over capacity in the French market and in all European markets and probably a little also in the US market no doubt and this means it has strong impacts profitability of all other means of production especially those which are not regulated but which are needed to balance the system so the market organization is moving towards the capacity mechanisms which is a way to compensate those producers that have units which are used only from time to time for the capacity which are not supported by enough hours of operation so that they would be profitable so in chain instead of closing them shutting them down the regulator now allows and this is part of the new directives that will be discussed in Brussels from now on but it's already implemented in a few countries the regulator does allow to pay for capacity instead of paying only for the power that is really generated but anyway we now have over capacity most of the time we see negative prices which is probably is that a good idea we see negative prices in an economy no it isn't thank you for agreeing with this so we see negative prices at all kinds of times we see negative prices in the US we see containment of a very expensive wind and solar assets that have been supported by tax payers money or electricity bill money whether it's in the US in China in Europe we see containment situations so we see the market is very sick and we believe we now need to think again about regulation I think it's very interesting to see that the very liberal Mrs. May in her campaign just a few weeks ago stated that she wants to re-regulate the electricity bills whereas the UK has always been the forefront of liberalisation she wants to cap the electricity bill according to what a committee made of independent people will say so that means we are in a probably still in continental Europe at a time where Brussels is trying to move towards liberalisation whereas the UK always ahead of everybody is already going back to state intervention on taxes so I think this is interesting and it also means in our view that there is a trend where looking at the energy market and thinking the market will resolve everything doesn't work as we see with these examples and creating attacks on carbon is not shocking from my point of view so we believe and I think we will agree on this we need to provide a clear first price signal on carbon we believe it's essential both to drive efficiently the transition towards low carbon energy at the lowest cost for consumers and also to be one important stone into the rebuild of this very disorganised energy market we believe it can be done gradually and it can be done in such a way that it leads to no massive phasing out of production units in the short term doing it in a gradual transition will enable little by little to shut down the most polluting plants without any discrimination and remunerating those which are still needed for the security of supply through a mechanism for capacity we believe that the tax will also enable to bring resources to governments to accompany those people which will have difficulties to manage that transition those that are usually called the losers in brackets sorry there are some social impacts on coal industry whether it is the mines or the plants and having resources from the states on the tax which hopefully will be only temporary because at one point in time there will be an adjustment of capacity to what's really needed but based on a decarbonised power system that temporarily this tax will help the governments to mitigate the impacts or social impacts on these industries and of course a carbon price floor will help emergence the emergence of low carbon options so just to conclude first we believe the current EU ETS system has failed to deliver any short and mid benefits we understand maybe after 2025 something could maybe one day happen but that's not good enough we support the national initiatives for a carbon price floor we believe it can be implemented very quickly as we have seen in the UK we believe that the time today for an initiative that maybe could be generated in France with quick support from Germany obviously after the September elections but it would in just a few months allow for the use of existing gas plants instead of existing coal plants to be implemented quite quickly and we believe that according to our numbers we could reduce carbon emissions every year very soon by 40 million tons thank you very much thank you good afternoon to all maybe first to come back on the market need and customers because regulators and governments are important but what definitely matters even more are customers requirement and needs it has been mentioned during the previous panel but clearly we view in total the world as changing for good I know it's not a widely shared idea but clearly we see globalization having helped to lift millions of people in emerging countries out of poverty out of starvation and education levels have increased and clearly those changes have required energy, energy to fuel manufacturing industries to transport to generate electricity to light, to heat, to cook and so on and needs have had of us are clearly still enormous growing population from 7 billion today to 9 billion around 240 it has been they call that today 1.3 billion people have no access to energy or reliable energy and to have no access to electricity so the needs are there and we think that we have to do that same time we have to of course to acknowledge that environmental stresses have increased including for the air that we breathe and of course the climate changing with greenhouse gas emission is one of the main issues that our nation have to face for total energy is our history and our mission as of today is what we call the responsible energy major being the world that we use in the oil and gas industry to design the main worldwide companies of this world and this mission entails that we intend to bring to our worldwide customers safe reliable affordable and clean energy and these four words are of importance and the challenges of meeting this mission lies clearly in today's rapid evolving technologies energy markets and customer needs second like to maybe to explain a bit more what we have decided which is in fact to integrate climate into our strategy and clearly at the heart of our long term strategy we aim to supply an energy mix consistent with the objective of limiting the global temperature to just 2 degrees C and 1100 I know that there can be debate between 2 degrees C and 1.5 but we believe that if all the governments were in the way to address 2 degrees C challenge we will be better off than what we are today and to reduce CO2 emission what we must do and it's important with what I is saying we have three main ways among fossil fuels use less carbon rich energies and of course coal second increase energy efficiency and third increase the use of renewable energies and we have decided to work on all of these three requirements in terms of energy mix we have decided to exit the coal business and we did that already now more than 2 years ago and today in oil and gas we prioritize clearly the gas project and therefore we reduce the carbon intensity of the energy that we produce we are today at 50% of gas in our production mix it will be very soon what we call soon in the oil and gas industry is 10 years 60% of gas very soon we are also developing our low carbon businesses promoting and developing and making our end in carbon capture usage and storage which is something we think of importance especially for the remission horizon and of course we play also in improving energy efficiency first in our own industrial installation but also advising our customers and third we are growing our activity in renewable energy we have been active mainly in solar more than 30 years now we are one of the big players there especially with our sun power subsidiary based in California we focus also on electricity storage with batteries which is a new thing for us since we have acquired 1 year ago SAFT and we have set ourselves what we think an ambitious goal of expanding our low carbon business to 20% of our portfolio in 20 years at the same time in order to maintain the long-term strength and competitiveness of our oil and gas business we are focusing clearly on the oil and gas project with low break even cost we think that this is what matters most to many developing countries for them to have access to energy very affordable as I said energy third important point we are in a situation where we feel very optimistic about all those changes because solutions do exist and clearly the good news is that technologies have been and are still rapidly evolving and bring solutions to all of these energy challenges that we are facing in only 10 years has completely changed 10 years ago we are fearing peak oil and peak gas with ever growing cost and prices we are fearing ever growing dependence on a limited number of producing countries and since those 10 years unconventional revolution has happened and those limitations no longer exist with at least 50 years ahead of us in terms of oil and gas resource and this for instance unlock our decision to exit coal we don't think that coal is needed anymore on planet there is enough gas to replace coal 10 years ago we had also cost for solar photovoltaic around 500 per megawatt hour as I said during the first panel we are now in many countries below $50 and $40 of course for entertainment generation during the day but cost have been divided by 10 and this is a fact at the same time of course we must also remind ourselves that they have been during the most 10 years useful wake up calls such as a draining risk of a nuclear risk with Fukushima and cost evolution of some energy can mention nuclear have not all been in the right direction but what we consider today is that if there is no one single ideal energy we believe that today there are enough solutions available to governmental choices to allow the two degree scenario to happen such as in particular the low carbon fossil and of course gas is part of the solution CCS carbon capture and storage is clearly also for us part of the solution even if it is a longer term solution solar is clearly one of the main driver today of the low carbon electricity and bring new solution especially in distributed generation wind has made a lot of progress in terms of cost and reliability we still believe that biomass for transportation transportation where we need liquid fuels because of energy density should be considered as part of the solution and storage and storage of electricity of course is one of the big issue on which we need also to progress further so the solution do exist but clearly the two degree scenario and of course more ambitious one will only happen if decision makers are taking objective views as regard the proven cons of any available energy taking a dynamic view because time is a reason to solve the equation between energy need and more stress and energy cost so which policies are needed of course the first one and I think we all agree on that and we concur on the fact that we need the world needs the price signal we can mention that we have been taking an initiative with 10 or 9 of oil and gas companies in favor of climate and in favor of CO2 price including we brought into this association our friend of Saudi Ramco so clearly CO2 price has to be a part of the solution we will not comment unless you have question during the debate what has been said I think I concur with many many things that have been said by the previous speakers but maybe I should focus on more urgent needs and urgency the first urgency for us and I concur completely with what Jean-Benard Lévias said is to replace coal by gas in power generation it's good for air pollution clear but it's also in term of climate change the cheapest and quickest way to save CO2 emission and particularly of course in places like in Europe where you have cocoon gas fired power plants like in Germany and coal power plants that are still running baseload we are simple measure to implement it has been mentioned by Jean-Benard CO2 price floor for power generation it has been implemented in the UK it has worked it has delivered the result you can figure also about emission performance standard to penalize or stop the really polluting power plants so solution do exist we just did a decision and a quick decision because in the meantime CO2 emission are still running second energy baby is in solar it has been mentioned that solar has reached economic competitiveness and in some countries we don't need any longer subsidies or governmental support but we have to remind firstly intermentity and we have also to remind that it's not a case in all countries and what we have seen in many countries including in France that we have gone from very favorable feeding tariff maybe two favorable feeding tariff to now bidding processes that have difficulty to offer fair and objective competition with the difficulty to compare serious offers which will deliver expected production in countries on one side and less serious one for which we see default even before starting construction of project and we have seen for instance bidders can be mentioned also for what have been proposed for this offshore wind farm in Germany which will start in 2025 of course the bidders are betting on a sharp decrease of the cost but what will happen if this short decrease of cost doesn't take place and we see that in a lot of bidding around where people are betting on a price decrease for the solar panels and then the default if we are not getting the required price I could also mention in solar long term industry always to see Chinese industry eradicating any sort of competition on the upstream chain today among the 10 leaders in the solar system production 8 of them are Chinese most of the leaders are still losing 100 million dollars but they are still producing and distorting the competition and you can also wonder about the battery we are not on the verge of seeing exactly the same industrial unfair competition third emergency for us could be biofuels for which we have seen recent numerous critiques some of which are justified over much less and we believe that European policy makers in particular have been a bit too quick in reducing the possibility of biofuels when we know that second generation is still commercially unproven we know that in total we are very active in second generation and we have even a pilot project here in France in Dunkirk with beauty fuel and we know that the industrial development will be very very costly so don't forget about too quickly on the first generation other subject of course are numerous subject could relate to transition from centralized power generation system to more distributed generation especially with solar so I'm glad to hear Jean Bernard Levy promoting distributed generation we clearly think that it is with distributed generation that solar will reach its full potential and of course this offers a lot of attraction in countries with little or no grid but also in countries with grid and policy makers should avoid creating too many obstacles for such development support another issue could be a support to new technology and support to pilot project in particular for capital intensive project such as CCS or second generation biomass from our experience everybody is ready to support R&D and we have seen that in a lot of different subject including in batteries but usually R&D is not an issue but difficulty is coming later with industrialization and especially in Europe we are all in agreement on the fact that electric vehicles are strategic and will be developing quick today 40% of the cost of this electric vehicle is batteries and we are the verge of seeing all the cells to be manufactured either in the US or in Asia but not a single one in Europe so stop there there are many other issues that we could cover but I think this one at least are the ones that we think deserve to be considered as urgent as of today thank you so maybe I ask one question and then I'll open it to the floor one other thing that strikes me is that all of you seem to have pretty clear ideas of what needs to be done but then somehow it doesn't happen that the policy making process doesn't yield the outcome that you are advocating and rather clearly and from your perspective having dealt with government, policy makers, policy officials why is it that the academic community the industry is not able to move the politicians towards carbon pricing some of those are in this support that you are advocating I understand it's a vague question but I think it's at the heart of what we are trying to do at TSE which is to sort of move the debate in a more practical direction so I don't know which of you wants to start with that yeah I was struck by the discussion of how low the carbon prices in the EU ETS in the sulfur dioxide trading system in the US we didn't have a price floor we thought very hard about the level of the cap and we in negotiation did something that I've never heard of anybody else doing we got all parties to agree that there would be what came to be called the ratchet so if we give some allowances to you and some to you we then total that up and rescale to reach the agreed upon cap now that's a perfect public choice kind of mechanism because the rescaling imposes diffuse costs when I give you some extra allowances that's a concentrated benefit the cost of that is spread over everybody and that worked I think the reason we've had a very hard time everywhere and that was just luck I don't know why we managed to get away with that because sulfur dioxide was a small part of the economy I think and the perceived costs were not that high the reason is this is advocating in effect higher taxes right I mean this is not higher subsidies for solar this is more expensive stuff and that's just a hard sell and I think there is this feeling that we read on need to do that we can do with all these other policies in fact you can for a while at the expense of distorting investment raising cost doing all these other stuff all these other things that rich countries can afford but not for long and I think I just think the problem is a high carbon prices viewed as tax and it's hard to sell that John well let me just first reassure Dick that his former student is not an apostate and started becoming a worshipper of Kyoto actually I think Kyoto was deeply flowed it was more ambitious than Paris but at the same time it was for very different reasons deeply flowed and one of the reasons you gave actually is that you know if you have a high price in some countries and a zero price in other countries then we will join and that even ignoring leakage leakage price because when you get high price you will get some leakage which we haven't quite seen yet the CDM mechanism was flowed as well was well intentioned but completely flowed and so on and so forth so if you can by the way I will not I will not call the cap and trade EU ETS system as a failure in a sense and his phase one was just awful I mean we should have done cutting and pasting from the SO2 market it was we redid all the mistakes that had been done before and there was one way of doing it well and we just could have cut and paste and that would have been something more complicated is much more fun but so Kyoto supply a good excuse to the US first actually never ratified Kyoto and then the others and the EU ETS I mean even better done which was after 2008 still didn't work simply because I think in my view Europe didn't want to have some any kind of indexation mechanism to react to the European crisis and that and therefore decided to free ride just like anybody else bringing the price to four or five and I'm very impressed by the fact that even 20 or 30 euros can be impact but then the question is what shall we do because we talk about economics and we all agree on the economics of the thing so what about the politics and I still submit that you cannot just have everybody signed up like this and then because you are completely sure you'll not get nothing in your agreement you know the all producing countries will not sign anything that will hurt their interest so at some point my view was to try to create a coalition but not a club with voluntary you know basically get a coalition that will actually put a lot of pressure in various other arenas on the other countries to join and you know just I'm not sure it will work but I don't see any other way around I mean we need at some point to put some pressure and then discuss how you can allocate the you know you need bribes and the SO2 market again is perfect for that look at your book it hasn't been plain ceiling you know it was a long long process to get the Clean Air Act amendment in 1990 and there has been lots of bribes in the process the important thing is that you fix the budget you know the number of permits and then you just fix the bribes in some way and you know we have to do that and in my view it's not the only way to do it the reason we got to emissions trading because there have been debates in congress of all kinds of command and control proposals to deal with the problem for a decade and basically none of them worked in the sense that they passed a basic fairness test you could do that with emissions trading because yeah it's he has a problem so he doesn't actually have to reduce he can reduce easily he will reduce easily that worked command and control couldn't deal with the heterogeneity and I think that's going to become an increasing problem as I suggested thank you I yeah maybe a couple of comments cap and trade ETS in Europe I know it's conventional view but it has been a failure for me it has not been in fact the failure has been that we have distorted the market by promoting renewables outside of the ETS system and therefore we paid a very high cost to reduce our CO2 emission in Europe but the objective of reducing the quantity that have been decided will be met and therefore it's not a complete a complete failure just to give some credit to the guy who decided this system second why is it difficult to take a decision well first the obvious reason is that it is a global issue and not a single country can take by itself the right decision so it has always been difficult for large number of countries to agree with of course diversified interest second the benefit of those policies are really long-term benefits when the drawbacks are short-term problems in many countries and usually governments have of course a tendency to favor short-term compared to long-term and maybe a last issue which is less important but I'm willing to mention it is I would say the religious fight for climate which bring lack of clarity in some of debate that should be much more rational I'm meeting from time to time with NGO that are telling me that they are ready to do whatever they need to promote the fight against climate change and when I say gas is part of the solution because you can reduce today the CO2 emission as a big way for limited cost they are saying no way because it's fossil so it's a devil and therefore the rational is lost Any questions from the room? Thank you, thank you for the very interesting round table there is an elephant in the room I think we should talk about the decision of Donald Trump to remove the United States from the Paris agreement and I have two source of concern the first one is the fact that carbon leakage becomes an enormous problem I mean if the US has a zero price of carbon whereas in Europe we have a large price of carbon I mean industries will go from Europe to the US and the US will be great again but Europe will be in misery so first problem second problem is that we have this, that was mentioned equity problem if the US decided to and that's what they understand what they decide not to contribute to the green climate fund I don't see how the developing country will accept to be part of the deal so that's our at least two reason of concern that the US decision will not be the end of the story there will be other things happening and not in the good direction my understanding let me apologize again for the I think you're right about the green fund I think there is no way this Republican Congress will vote to make contributions token contributions maybe but not what was promised as to the price of carbon we were not going to put in place even in a Clinton administration a cap and trade system there just wasn't unless she had really won a Democratic majority in the Congress which was statistically impossible what we were going to do was regulate power plants and shift coal to gas we're shifting coal to gas now just because of the economics because gas is so cheap so we're sort of doing now internally what we're supposed to do in Paris a little less because they're going to try to relax one thing or another but the clean power plan was basically forcing a switch in a very ugly awkward way the switch is occurring for economic reasons so in terms of the US policy domestically I don't think this is a huge deal and withdrawal takes four years and we all hope and pray he's defeated and we come back again but in terms of short term appropriations for the green fund I can't imagine that happening I was going to say what you just said which is we still have three and a half years before the next presidential elections hopefully the states and some of the large industries in your country will help us live through these three and a half years second thing I wanted to say is that carbon leakage and so what I think if public opinion and politicians are brave enough they will make the decisions and they will mitigate for these decisions they do that all day long they create infrastructure and they mitigate for the effects of the infrastructure on the people that are hurt they create they make decisions that compensate for these decisions so my belief responding to is that there is not enough pressure there is not enough belief in it maybe there are still some hidden climate spectacles that they want they are skeptics but they don't want to say they are skeptics but they are quite happy that they behave like skeptics and so on but if they want to do it they will do it and I will just give you a second example which is that of Sweden Sweden is a country with very little carbon emissions because it is decided to have a price floor for carbon at 100 euro per ton and it is implemented today and I don't know that Swedish industry is dead I know that Swedish industry is a higher part as far as I know of the Swedish GDP than the average in Europe any other questions from the room you guys think I have one question no they will come let them think that is the end of the day there was one issue that you touched upon very briefly which is about energy efficiency when you look at some of the plants from the the more environmentally friendly NGOs they all talk a lot about large savings in energy on the other hand we know and Catherine reminded us that 1% growth in energy consumption is equal to 1% growth in GDP so what is your view on that do you really gain from energy efficiency or is it just complicated to achieve and I know it's a hard question but maybe some sense of where you think it's going to play in the mix I was discussing with the Chinese minister for energy it's called NEA Energy Administration he was telling me that according to what they've been seeing for the last 2-3 years there is now a clear decorrelation between GDP growth and energy consumption in the country that they have now experienced a situation where the ratio was above 1 that means energy consumption would grow more than GDP for many years like 15 or 20 years and for the last I don't remember 2-3 years and apparently for their next plan 5 year plan that it will be 0.4 that means that if there is for instance 5% GDP growth and I think today they are more like around 6.5 but just because the maths are easier then there will be an energy consumption growth of around 2% I think that's to be expected and historically efficiency has been rising I mean most of these models in the energy sector assume I don't know 1% annual growth in energy efficiency because new equipment is more efficient than old equipment I mean that's sort of the natural way of things the next step however is the hard step and you hear that a lot from environmental NGOs which is energy efficiency is the low hanging fruit we can easily become much more efficient Catherine has colleagues I have colleagues who are trying to test this hypothesis by looking at the effectiveness of energy efficiency programs and they get mainly negative results the engineers say we do such and such and such and will reduce consumption and it doesn't work for a whole set of human behavior reasons so yeah I believe will become more efficient over time I believe that raising energy prices by a carbon price or however you'd like to do it will accelerate that I do not believe it's free and easy there's just no energy there's just no evidence for that so it's low hanging fruit and we can really easily become a lot more efficient well why haven't we if it's that free and easy it can be done it will be done but it's not low hanging fruit yeah I think on our side we believe strongly on the potential of energy efficiency there are some sectors where it is easy to measure and and vehicle consumption is only one one example of what has been achieved and clearly when you have an economic signal such as taxis as we've seen in Europe on gasoline or CO2 price that could reinforce the cost of energy there is enough engineering ideas to improve and to reduce the consumption so we have seen that in Europe vehicle consumption being divided by two can tell you that if in the US you would have the same amount of taxis or CO2 cost the one that we have in Europe you will see the change of pattern right away and there are all the sectors where now technology and digital in particular is helping every consumer to better monitor its electricity consumption and we have seen also the change in the bulbs bringing a lot of energy savings and they are far from being widespread everywhere in every country in the world so of course there is a very large potential for energy savings question from the room so some people are excited by the idea of linking or merging local capital market for greenhouse gas emissions so we have the example of California and Quebec Merge and Ontario that is joining and so what is your is it a hope that we will have local capital market on greenhouse gas emissions and because of this merge we may cover at some point all the planet with capital trade markets this is a bit of a technical issue instead of global carbon market you have local carbon markets that merge I don't know yeah sure that could be a start for global carbon market we all want that the question is there are several questions first where are you going to find the bribes I was mentioning so you have to bribe some countries given that we are not going to give money at least the US is not going to give money to LDCs you have to do it more discreetly through permits so you have to make sure that there is space in your proposal for some systems for some permits which go to LDCs that is the first thing the second thing is exchange rate we all know there are some kind of gaming so you have to fix that in advance when French university merged you notice that all the professors are promoted three months earlier before that it's a very typical thing you have to make sure that actually you are comparing apples and apples so you don't create adverse selection and more hazard in the process so it's a complicated process I've never studied it but yes on paper it looks great but the devil is in it the detail can you comment on that any other question from the room yes ok I'm Nicolas Treche from LDC so this morning I was at another place in Paris I was at a conference about nudges Kassenstein was there the creator of the concept and they talk a lot about these behavioral tools there were many people policy makers for instance they were showing how their buildings or their cities are going to be very energy efficient because of nudges I haven't heard much about this today so do you think it's a distraction or do you believe in that you may want to define what nudging is for the non members of the academic community nudging is when you don't give incentives monetary incentive but I give you a nudge, I give you a little push so I tell you, your neighbor is doing well therefore you should do it it's a way of affecting your behavior without you so that's a very fashionable non-economist I don't know how you say bobo in English I'm a little surprised by the question I think I was certainly not mentioning this kind of reward or behavioral trends when I was talking of decentralized energy, I think this is a much stronger behavior at least that's what we see with our clients I believe, by the way I'd be happy to understand some of the academics view that consider that energy efficiency programs are not being very efficient but I believe at this stage there is a strong request from many people, very large part of the population that do know that the low-hanging fruit is indeed in their behaviors and if we help them with tools for instance we have implemented a free app on iPhones and androids and so on where people can benchmark their electricity consumption based on a few clear and simple indicators such as what do you live what's the size of your apartment and so on and then the system the algorithm tells you that normally your electricity bill should be 50 euros a month and you pay 65 and so this is a free app, very simple we have millions of people have downloaded it and we believe this is not really like a notch, I think it responds it answers a true request from many many people other comments on that final question maybe, yep this has to be the last one yes, Olivier Lacroix, so maybe a comment and a question, I'm striking by the fact that the discussion really focused on the CO2 issue which is indeed a key one but I think it is not the only one especially with regard to the power markets because due to the move to the development, the strong development of renewables with a zero marginal cost with the move to the decentralised generation I think we can expect very big moves in the way the market as a whole is going to evolve to change in the next year and I think this is also a fascinating question for the economist I have a question maybe to Mr Schmalenzel because in the US you have the chance to have very various organisations of the power sector according to the states, in some states it is fully regulated, in other ones it is fully open sometimes partly open so do you have some lessons learned from the observations that you can make about these various organisations of the sector? Well the lights are on everywhere so we can respond to that we have at least three different regimes we have markets we have vertically integrated utilities and then in the west the federal government plays a major role as a generator and owner of transmission just a footnote before I get to the question it is curious that most of the federal facilities that generate electricity and sell it to consumers at a discount were built by democratic administrations in what were then democratic states and what are now republican states so whenever somebody talks about privatising this federal socialist electricity system it's the republicans who scream loudest against it it's highly ironic interest trumps principle I'm not sure there are any dramatic lessons learned I think the market systems demonstrate gains from trade and there is a lovely experiment when two markets were joined all of a sudden vast amounts of electricity that hadn't flowed flowed in response to price signals so the markets work but frankly our market systems like everybody else's are having trouble dealing with the influx of renewables particularly non dispatchable rooftop solar there's lots of discussion about do we need a flexibility product how exactly are we going to change the market so I echo your statement there will be changes in our industry I know and surely here I'm not sure we have learned lessons from our various experiments that transfer I mean vertically integrated utilities can cope with some of these changes in a way easier than markets can right because you just say well we're not going to be too concerned about the cost and we don't have rents to shift around and keep the lights on and try to minimize cost and you may not do that as well as a market but you can keep the lights on whereas markets with huge influxes of renewables start having trouble about products and negative prices and how do we run this in that capacity market I think we're going to get it right and I think the markets the market based systems are going to come out ahead in the end but I'm not sure we have any clear lessons beyond that and you thought about this more than I have and I think that's going to be the last word thank you very much to our participants we did a fantastic job, thank you to all of you and I think that's the end of it thank you very much