Lecture by Guntram Wolff: Climate and Macroeconomics

02  June 2022    5:00 pm CEST

Guntram B. Wolff, Director of Bruegel, Brussels


wiiw, Rahlgasse 3, 1060 Wien, Seminar Room, Souterrain


Economic growth has historically been the main driver of rising greenhouse gas (GHG) emissions. To achieve steep emission reductions, the world would have to either decouple global GHG emissions from gross domestic product (GDP) at an unprecedented pace or face deep cuts to GDP. The lecture will review the literature on both degrowth and green growth and discuss their most important arguments and proposals.

It will then discuss the outlines of a ‘green fiscal pact’ in the European context. The additional public investment need required to meet the European Union’s climate goals is between 0.5 percent and 1 percent of GDP annually during this decade. Increasing green public investment while consolidating deficits will be a major challenge. While simulations show that budget consolidation can be done at a moderate pace in line with EU rules if those rules are interpreted flexibly, past consolidation episodes resulted in major public investment cuts. This time, there is a need for a major increase in investment. A ‘green golden rule’ (excluding net green investment from the fiscal indicators used to measure fiscal rule compliance) is the most promising option to address this tension.

Relaxing the strictness of the EU fiscal framework beyond its existing flexibility and the proposed green golden rule does not appear necessary in the next few years. The uncertain growth impact of green public spending and the risks to growth from climate change create difficult trade-offs in fiscally weaker countries. In any case, better regulatory policy and a higher price on emissions should incentivise private green investment and reduce public costs. These ingredients should be combined to form a ‘green fiscal pact’.

Guest Speaker: Guntram B. Wolff

A recognized thought leader and academic, he regularly testifies at the European Finance Ministers' ECOFIN meeting, the European Parliament, the German Parliament (Bundestag) and the French Parliament (Assemblée Nationale). From 2012-16, he was a member of the French prime minister's Conseil d'Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed to the G20 high level independent panel on pandemic prevention, preparedness and response. He is also a professor (part-time) at the Solvay Brussels School of Université Libre de Bruxelles, where he teaches economics of European integration.