1. Implementation of NGFS Climate Scenarios in France with four
multisectoral models
-
OECD WORKSHOP ON CLIMATE TRANSITION SCENARIOS
6th of July 2022
Paris
Baptiste Boitier (SEURECO)
on behalf of ADEME, Banque de France and CIRED
This project has
received funding from
the European Union’s
LIFE Integrated Project
2019 program
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2. Objectives
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What is « Finance ClimAct »?
• A EU LIFE project coordinated by ADEME that aim at
implementing sustainable finance in France and Europe
National Low-
carbon Strategy
of France
Action Plan
for Sustainable
Finance
Contributing to the implementation of
• One key lever is the climate risks management and stress-testing: Finance ClimAct helps the
development of technical capacity to conduct climate stress-tests by supervisors and financial institutions
• Within the framework of the NGFS scenarios and assumptions (Phase II, June 2021), we aim at:
 Highlighting key assumptions that drives transition shocks and the main theoretical limitation of the modelling
 Analysing macro and sector economic impacts and identifying key mechanisms at stake in the modelling tools
explaining the results and their potential divergence between models
 Proposing modelling improvements and identifying standard characteristics to run climate stress tests
 Assessing multi-sector models capability to draw disruptive financial shocks at macro and sector level.

3. Methodology
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Use four macroeconomic models for France:
• IMACLIM-R France (CIRED): Imaclim-R France is a dynamic, recursive, multi-sector macroeconomic model of the French economy. At the
macroeconomic level, it consists of a Computable General Equilibrium framework impaired by short-term constraints related to imperfect
foresight and markets imperfections, including equilibrium unemployment and idle productive capital. At the sectoral level, the model
incorporates technical modules providing explicit descriptions of infrastructures, equipment and technologies.
• NEMESIS (SEURECO): NEMESIS is a sector detailed macro-economic model for each EU member state (+UK, NO and IS), short-term
economic dynamic is driven by demand whereas in longer-term, supply properties matter. NEMESIS is mainly used for socio-economic
impact assessment of structural policies (climate, energy, fiscal, innovation, etc.). For climate/energy analysis, the model uses a detailed
energy-demand and electricity production module.
• NiGEM (Banque de France): NiGEM (National institute Global Econometric Model) is a global macroeconomic model consisting of
individual country models of New Keynesian structure. Each country/region is modelled through a dynamic set of equations where agents
are generally assumed to have rational expectations and there are nominal rigidities that slow the process of adjustment to external shocks.
In modelling the NGFS scenarios, NiGEM is coupled with REMIND-MAgPIE, which is a comprehensive IAM framework that simulates, in a
forward-looking fashion, the dynamics within and between the energy, land-use, water, air pollution and health, economy and climate
systems.
• Three-ME (ADEME/OFCE): ThreeME is a neo-Keynesian macroeconomic model developed by ADEME and OFCE since 2008. It describes
the French economy in 37 sectors, including 17 for energy. Since it is an hybrid model, energy consumption depends on vehicles fleets and
building stocks and their future evolutions. Taking into account a sub-optimal equilibrium situation, it shows the possible double dividend of
a transition policy.

4. Methodology
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We defined a set of common assumptions for all models:
• Model drivers: Population and French labour productivity
(baseline)
• IEA WEO (2021) projections for fossil fuels prices (“Stated
Policy” scenario for the “Baseline” scenario and the
“Sustainable Development” scenario for “NZE 2050”, “Delayed”
and “Divergent” scenarios)
• Recycling scheme: revenues from carbon tax are
redistributed to households (50%) and firms (50%)
• Use changes in NiGEM international prices and demand for
alternative scenarios
• Monetary policy in NiGEM (price-level targeting rule)
• Implement the carbon prices from Remind for the NGFS
scenarios: “Baseline”, “NZE 2050”, “Delayed” and
“Divergent”. It implies different emissions reductions in the
different models but it ensures that the initial economic
burden is similar in all models

5. NZE – 2050 : GDP and components deviation (w.r.t baseline)
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• Models’ response to carbon prices shocks
differs and is explained by divergence in
modelling assumptions about:
1. The extent of the crowding-out effect of “green
investments” on other productive investments
2. The way on how this crowding-out effect arises in
the models
3. How public consumption is modelled
4. Rest of the World response through the
competitiveness and demand channels
Annual GDP components deviation w.r.t. the baseline scenario (in GDP ppt)
Caution: scale is
different by model
(Preliminary results)

6. All scenarios: GDP and components deviation (w.r.t baseline)
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• Almost all models show negative
impacts on GDP of more adverse
transition scenarios due to:
• Lower net investments in all models in
both adverse scenarios
• Higher loss of competitiveness in NEMESIS
and NiGEM in the Delayed scenario
• Lower private consumption in the
Divergent scenario in NEMESIS, NiGEM
and Three-ME
2020-2050 GDP components deviation w.r.t. the baseline scenario (in GDP ppt)
(Preliminary results)

7. Concluding remarks
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Our models show different potential impacts of the climate transition in France:
• But the extent is limited: +1.5% to -1% of GDP, over the period 2020-2050, far from expected long-term costs of physical risks
• Theoretical backgrounds on how the models represent the functioning of the economies impact the results, especially:
• The monetary policy
• The crowding-out effect of green investments on other productive investments
• The debt capacity of economic agents
Keys limitations
• Our methodology do not ensure that climate objectives are reached
• Short-term volatility representation is limited in our models
• Explore impacts of potential transition risks’ channels: labour market, stranded assets, etc.
• Sensitivity analysis will help better understand models’ behaviours

8. Synthesis
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Macroeconomic impacts Meeting climate targets Used explicitly by the NGFS Used explicitly by the Banque
de France (trail exercise)
Carbon price Limited Strong Yes Yes
Fossil fuels prices Medium Strong Yes Yes
Technological innovations Limited Medium Partially Partially
Carbon fiscality recycling scheme Strong Limited Yes Yes
Monetary policies Medium / Strong Limited Yes Yes
Crowding-out in capital markets Strong Limited Partially Partially
Regulatory measures (other than
carbon price)
Medium Strong No No
Stranded assets Strong Medium No No
International economic demand Strong Medium Yes Yes

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THANK YOU FOR YOUR
ATTENTION
baptiste.boitier@erasme-team.eu