April 2021

Post n°213

What Carbon Border Adjustment Mechanism for the EU?

Published on 04/28/2021

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By Rafael Cezar and Fabio Grieco

While the principle of a European Carbon Border Adjustment Mechanism (CBAM) has been agreed on, discussions as to its calibration are still underway. This post presents three scenarios in which the calculation of the tax base and the scope of the mechanism vary. These choices have significant consequences: the gains in terms of CO2 reduction can vary by a factor of three, depending on the scenario chosen.

Chart 1: Short-term impact of the CBAM on EU imports and import-related emissions
Chart 1: Short-term impact of the CBAM on EU imports and import-related emissions Source: authors' calculations, OECD, CEPII, Cezar & Polge (2020).
Updated on 04/28/2021 17:59
Post n°212

Why can sovereign and corporate borrowers in some countries borrow at negative rates?

Published on 04/23/2021

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by Sylvérie Herbert, Maria Sole Pagliari and Adrian Penalver

For several decades, advanced economies have seen their borrowing costs decrease, including amid the coronavirus pandemic. This is especially true at the long end of the yield curve. Even long-term bonds issued by some private corporations in the euro area trade at negative interest rates. This decrease in borrowing costs primarily reflects a decline in the natural real rate of interest due to population ageing and slower productivity growth, as well as the more recent compression of the long end of the yield curve resulting from central banks’ bond purchases.

Chart 1: 10-year sovereign yields and asset purchases
Chart 1: 10-year sovereign yields and asset purchases Sources: Bloomberg, ECB
Updated on 04/23/2021 15:57
Post n°211

The public health crisis: a complementary approach to firms’ activity

Published on 04/22/2021

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By Benjamin Bureau, Anne Duquerroy, Mathias Lé and Frédéric Vinas (Banque de France), Julien Giorgi and Suzanne Scott (INSEE)

Since the start of the public health crisis, the Banque de France and INSEE have compiled a monthly estimate of the loss of activity in each sector, notably via their monthly economic surveys and their monitoring of high-frequency data. The monthly surveys have proved to be a reliable and almost real-time indicator of the impact of the restrictions, and have on the whole been confirmed by the national quarterly accounts. In parallel, the Banque de France and INSEE have launched a joint project which differs from these surveys but complements them in terms of methodology: using real turnover data for individual firms (measured using VAT returns), they compare ex-post the “activity shock” with a counterfactual of what turnover would have been without the. This makes it possible to carry out an analysis at a more granular level, within individual sectors. This blog post presents the first results of this project, which are consistent with our monthly surveys. They will be supplemented with an ex-post analysis of firms’ cash and financial positions.

Chart 1 – Evolution of the aggregate shock to activity over 2020
Chart 1 – Evolution of the aggregate shock to activity over 2020 Source: VAT data (DGFiP) and authors’ calculations.
Updated on 04/22/2021 13:19
Post n°210

Climate risks and collateral: a methodological experiment

Published on 04/14/2021

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By Oustry Antoine, Erkan Bünyamin, Svartzman Romain and Weber Pierre-François

The securities accepted as a guarantee under the Eurosystem collateral framework are not, in aggregate, “aligned” with the climate targets of the Paris Agreement. They can therefore be considered to be exposed to so-called “transition” risks related to climate change. Technically, it would be possible to ensure that the collateral pools pledged by each counterparty are more aligned, but this raises methodological questions.

Chart 1: Coverage rate and climate alignment of the pools of collateral pledged by Eurosystem counterparties, based on the methodology developed by Carbon4Finance
Chart 1: Coverage rate and climate alignment of the pools of collateral pledged by Eurosystem counterparties, based on the methodology developed by Carbon4Finance Sources: Carbon4Finance, Eurosystem and authors’ calculations.
Updated on 04/14/2021 16:15