The Green Transition and the Challenge of its Financing

The consequences of climate change are significant for the economy, society, and the environment. Achieving carbon neutrality by 2050 is essential for humanity's preservation. Appropriate measures must be taken to encourage economic agents—households, businesses, and the public sector—to adopt a new carbon-neutral economic model. Supporting them in this transition is also crucial. The European Green Deal, the conditions for granting funds from the Next Generation EU programme, and the Fit for 55 legislative packages demonstrate Europe’s commitment to leading the greening of the economy. The aim is to reduce emissions by 55% by 2030 compared to 1990 levels, and to achieve carbon neutrality by 2050. The EU decision to prohibit the registration of new petrol and diesel vehicles from 2035 concretely illustrates the effort to transition towards this ambitious goal (confirmed earlier this month) . It is therefore more than necessary to accelerate the ongoing movement to mitigate the expected short-term negative effects on productivity and, consequently, on growth. As emphasized by the report from Jean Pisani-Ferry and Selma Mahfouz published in May 2023, the impact of the ecological transition is multidimensional and contains many uncertainties regarding its long-term effects on growth. Public finances are increasingly constrained, making financial markets essential. 'Green' finance has played a crucial role in addressing significant needs, particularly through the rise of green bonds. However, numerous obstacles hinder its full mobilization. W e discuss here the challenges of the energy transition, and the financial requirements needed to achieve carbon neutrality by 2050. We also provide a detailed analysis of the 'green finance' market, from its emergence to the deepening it requires. Finally , we examine the role of public authorities in the future development of green assets .