Welcome back. We discussed today very critical issue in decarbonization policies, and that is, how to share the burden of these policies, the cost of this policies. The essential point is that global warming is a threat that affects the whole of mankind, it does not affect any one in particular. Some people are more exposed than others, but no one in particular feels affected by it. It affects everybody. Not only that, but the origin of the problem is an origin that has roots in the past. It's not just today's emissions, but it's the emissions of the past people, our forefathers who are dead in the meantime and it is something that will affect not just ourselves but maybe even more our sons and the sons of our sons. Therefore, the question arises, who is to pay for this? Who is responsible for taking the burden of avoiding global warming? How is this burden to be shared? Because there is a burden, this is very important. Sometimes we hear that decarbonization policies may be successful in stimulating growth, creating green jobs, and that may very well be the case. But it ignores the fact that even before you stimulate growth and create green jobs, you have to pay for a course which until now has been hidden and nobody has paid for. We have emitted and nobody has paid for it. From now on, we need to pay for this hidden cost. This means that there is a lot of capital that has been created, a lot of investment capital that has been created which becomes obsolete and that's needs to be discarded earlier than expected. There is additional cost for energy because it will be more expensive to produce energy avoiding emissions entirely. So the question is, how is this additional cost to be paid? The advantage of carbon pricing is that, it brings these costs to the fall and it allows to calculate for it and have a discussion about burden sharing that is better based. However, not everybody's happy with the notion that we should primarily rely on prices for carbon. In particular, emerging countries don't want to see their growth and development potential affected and reduced by a high price on carbon. They look at the experience of the rich countries and say, "You have been emitting for 200 years and you are still emitting more than we do, and why should we pay for your past emissions? We need to be exempted from paying this cost or allowed to pay less, we are entitled to compensation from the rich countries in order to allow us to bear this burden." Decarbonization policies always require large upfront investment in new technologies, in new energy production facilities, in some of the emerging countries may not have the finance available to undertake that. Finally, that technology is likely to be in the hands of the industrial countries. So the industrial countries may indeed benefit out of the transformation of the energy system while emerging countries may be on the receiving end and only bearing the cost of this transformation. The problem has been acknowledged by the Paris Agreement, and there is Article 9 in it which has the language that they read on the screen namely, "Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention." So the principle that I asked to be a transfer or financial resources from the rich to the poor countries is there. In addition, in another passage of the agreement you can read, "Strongly urges developed countries Parties to scale up their level of financial support, with a concrete roadmap to achieve the goal of jointly providing US $100 billion annually by 2020 for mitigation and adaptation." So this is not an obligation, it is a strong encouragement. But the point is that, we are very far from that. The latest report from the UN Framework Convention on Climate Change tells us that growing resources have been committed but we are still at no more than $37 billion, and much of that is bilateral rather than be multilateral as encouraged by the Paris Agreement. So the notion that the rich countries will year after year, each year take a $100 billion and put them in a central global port that can help developing countries to finance their transition, we are very far from that. Now, it is also to be recognized that the issue does not exist only at the international level, but it exists as well at the domestic level. Who in particular within each country is asked or should be asked to pay for the carbonization in the transition and the energy transition. The point is that any change in the rules, any change in the energy systems will favor some people and damage others. There is nothing that is neutral. So when we have a decarbonization policies consisting of a price on carbon, this will increase the cost of energy. If we are subsidizing low-carbon technologies, the ones who can install them will benefit, the rest of the people will have to pay for it directly or in directly. If we limit consumers choices in any way, for example forcing people to buy a more efficient but more expensive refrigerator equally, we relatively favor people who have a very old refrigerator and need to change it anyhow, and damage the people that have just bought a new refrigerator and may need to change it. So each policy has cost. The problem is that in our democracies environmental policies and concern about climate change has been pushed primarily by green Parties, which have never reached the absolute majority of the vote, but have frequently been able to influence government decision making by participating in coalitions, and that is the normal behavior than the normal working of parliamentary democracies. But it may lead to a backlash, whereby government undertake policies which in fact do not have the support of a majority of the people. This may create resistance. So this is made more difficult by the circumstance that decarbonization policies are highly likely to be regressive with respect to income. In other words, their cost will bear primarily on lower income people rather than higher income earners. This is because of two main reasons; the first is that expenditure on energy is likely to be a higher share of the total expenses of a low-income family rather than high-income household. High-income households will spend a marginal share of his total income on energy. So if it increases they may not care much, but a poor family may be exposed much more. Secondly, in order to benefit from decarbonization policies from subsidies, from the encouragement or resist or limit the damage of higher costs for energy, we need to engage in investment. There is always something that you have to invest into: new more efficient car, better insulated home, double glazed windows, new heating system, whatever. Improving the situation requires up-front investment, and many low-income households simply don't have access to finance to engage in this kind of investment. They may not have savings on the side, they might not be able to devote whatever savings they have for this purpose, the banks might not be ready to finance them. So they are exposed. This takes place in a context in which there are several reasons why income and wealth have become increasingly unequal over the years over the past few decades, and this inequalities have been growing. This creates a lot of this content in many countries. We have been seeing this in electoral results or manifestations in the streets in many countries including some of the prominent industrial countries. So this is something that may end up having a crippling effect on the effort of decarbonization, because governments may be tempted to set aside the priority for decarbonization and limiting climate change. Which after all is not the immediate priority of any government in particular, and rather take care of the popular discontent that they register in their own people.