Good Economics for Warmer Times


Dear audience, both in the room and online, we are honored to welcome you to this HEC Talks unprecedented format, using the latest hologram technology to bring Professor Duflo from Boston to the famous ze.

With this technology, we can limit the carpet footprint of our conferences while still bringing in top speakers from around the world. We are proud to be able to offer this experience and we believe it aligns with our commitment to global impact and sustainability on 14th of October, 2019, you said. I am very honored.

To be honest, I didn't think it was possible to win the Noble at such a very young age. You claim this at the occasion of receiving the noble price in economic science for your experimental approach to alleviating global poverty. Today we are pleased to welcome you, second woman in half a century, and the youngest person ever to receive this distinction.

As a whole French Half American woman, you entered liquor normal, superior before pursuing your vocation in economics at Delta, former Paris School of Economics to satisfy your intellectual curiosity, but to affect real change in the world. At the same time, you were admitted to the MIT for a PhD, and you were then offered tenure in poverty alleviation and development economics.

Among other successes, you received the John Blake Clark Middle in 2010. For your critical role in developing economics. You are one of the 101st intellectual person as in the world. Your work had earned you a White House selection in 2013 to advise President Barack Obama on development issues. And finally, in 2015, you even received the title of Honor RIS Kza, professor at what we can call home, HSC Paris.

Dear audience, she is a prolific writer and a widely, widely cited scholar who stated back in 2005 to normal ship student, I opened my eyes to a reality that changed my life profoundly. As an economist, I could transform my desire to do something, to change the lives of the poorest into an academic carrier.

Thus, she co-founded with her husband a Nobel Prize winner, Abijit Banerjee, the MIT's Abdu Jamal Poverty Action Lab, which we can call Gmail to make it simpler, where she leads research in the economic lives of the world, poorest people, and finds way to alleviate poverty that are grounded in behavioral science.

This woman managed to reach the midway between humanitarian action and quantitative career. And yes, dear business school students. It is possible as a shareholder at the College of France on poverty and public policy and one of the most celebrated economists in the world, a British newspaper stated, step aside, this is the new face of French intellectualism.

She shows hints of idealism, has faith in redistribution, and she subscribes to the optimistic notion that tomorrow might turn out better than today. Following on from this prospect, what fills her head is the thought of doing good science. And nowadays good science especially applies to climate change at as a great UNE equalizer.

Why would you say we sure are all affected by the issue, but not equally. She stands by the fact that the world's poorest people and nations bear the brunt of its impact, widening existing disparities and creating new ones between and within countries. Should economists be more concerned about how to actually make public policy work?

She thinks so. In I talks. She will discuss the connection between inequality and climate change and whether they are or not, economic tools and solutions to address both poverty and climate mitigation adaptation and resilience all at once. Is it possible to consider the building of equity and inclusion into climate action for a sustainable future this evening?

Most of your underlying questions on the matter will certainly be answered. Additional questions will be taken at the end of the conference and we encourage those. Watching online to post the question in the chat at the interaction will be just as powerful as if we were all gathered in one single room.

Please join me in welcoming Professor Esther Duflo and thank you very much for joining us tonight again.

Bo. Hello. I'm, glad to be here. I'm, in some sense glad to be here in this format as well, since I'm going to be talking about climate change. And it seems, fitting that I didn't take a plane to a plane to come join you, I have described, climate change as the political problem from hell. And let me explain to you why it's so, it's so, because unfortunately, the people who are the most responsible for climate change are not the people who are the most, affected by climate change.

Lemme start by the responsibilities. Uh. Of course, we know that historically, the brunt, the bulk of the emissions that are responsible for the warming of the planet today have taken place in the countries that are today rich, in the service of the industrial, revolution that has made, you know, that has fueled our system of development.

So this is something that everybody acknowledges, that's fine, but often you hear that and you hear, but now of course it has changed because a lot of the emissions actually come from China, and quite a bit from India. And the, the trend in fact, for China and India, compared to say the US and Europe are, are not favorable with India and China starting to produce, more emissions.

So in negotiations, there is always this, kind of, uncomfortable positions. Of the country saying, well, you know, historically we might be responsible for it, but now this is really much more shared and everybody needs to make an effort. And, we shouldn't all be blamed. In fact, we are making more of an effort.

So it's kind of your term to make an effort, which puts in particular India on a very defensive position. Now what this is forgetting is that even today, the bulk of the emissions that are responsible, for climate change are due to, rich people. And of course rich people are mostly in rich countries, and you can see that, if you change a little bit the way that you calculate emission.

So typically we, we attribute emission to the place where they are in fact emitted. So if you, drive your car, that's the emission of the car, but then we should also think about what has happened to, to, to build this car and the emissions that. Um, created when this car was, was built, presumably not in the country where it's driven, maybe in China or maybe in Mexico.

And if we want to be really fair in, allocating the responsibility of the climate change emissions to, people in the world, then we should really try and go back to, the consumption and the, carbon content of our consumption. Now, of course, that's not immediately available in a data that needs to be, estimated.

Uh, location cell has done, a lot of work to try and estimate that by, combining the, elasticity of carbon emission of consumption with respect to income, with income inequality, data at the world level. To basically estimate for each person a full carbon equivalent footprint, based on their place in the income distribution of their countries and in the world.

And when we do that, we can now calculate by, your position in the income distribution of the world. How much do you contribute to the problem of climate change? And it's pretty easy to remember the results because there is, a, a simple magnetic rule, which is the 50 10 rule, roughly speaking, 10% of the highest polluter at the citizen level.

So 10% of the, of the people in the world are, the richest people in the world are responsible for 50% of the global emission and the 50% poor pe uh, poor fraction of the world is only responsible for 10% of the global. This, there was no reason why these things would land exactly symmetrically, but they do.

So the 10% richest people contribute 50% of the global emission, and the 50% poor people contribute 10% of the global emission. And of course, if you look where these people are located, the richest people tend to be in richer countries, and the poor people tend to be in poor countries. So even at the country level, you still get that the, the bulk of the emission, the real emission, the real carbon footprint, still takes place in the richer countries today and even in poor countries.

Uh, it's mainly the rich citizen of the poor countries that are responsible for the emissions. That's the first half of the problem. The second half of the problem is that the cost of climate change is also unequally distributed, but in the other direction. Of course, this is not something that often we think we should insist on because it's very good for people in France to realize that when there is a very hot summer, there are problems in France.

It's very good for people in the US to realize that, the forests, fire in California affects them as well, but to true reality, the, the fact of the matter is that first order climate change is hurting the poor and in particular hurting the poorest citizens in the world. Why is that the case? Uh, the first reason is purely mechanical, that it turns out that poor people tend to live in places that are already hot.

Uh, so for example, you look at the Sile region of Africa, the northern part, the northern part of Latin, of, Latin America, and you are seeing that the, the, those places are already hot, and therefore, even if the planet is warming at an equal rate. In every, country, the the places that are already hot are going to experience more very hot day by 2050 by 2000.

And the, the cost of, of, of temperature on human health and on the ability to produce food and so on is not linear. And in particular, there is something quite dramatic that happens after 32 degrees centigrade, where it becomes really unlivable, especially with, with humidity on top of that. And the fact is those countries that are poor, particularly the south region of Africa, the north of Latin America, the whole South Asian continent are going to experience more and more and more of those very, very hot days.

The second problem is that, the ability to protect yourself of, against this very high temperature. It is di directly related, to how much income, the country is making. So for example, it's going to become about equally hot and unbearably hot in Pakistan and in Saudi Arabia. But in Saudi Arabia there is a lot of money they can buy all of the air conditioning they want, and with that they can protect themselves against this very hot temperature.

After all, you know, it's, we had a World Cup in Qatar where we, air condition on the entire football field in Pakistan, they don't have this option. So even though these two regions will experience more or less the same warming over the next 50 or a hundred years, the impact, the estimated impact in term of mortality will be much higher in Pakistan than it is in uh, Saudi Arabia.

Similarly, you can compare Texas where a lot of people work. Inside people have the ability to use air condition, two, places in India where if it's become very hot, agriculture is gonna fail, the water table is falling down and people who work outside are, don't have the ability to protect themselves against this very hot temperature.

So the consequence is that if you're looking at the mortality impact of climate change, the impact, overall is going to be an increase by 2000, using a, a high emission scenario, the impact is going to be about an extra 7 3 70 3000, 73 death per 10,000 people, which corresponds roughly to all the deaths from HIV malaria, tuberculosis combined.

So all of the deaths from infectious diseases combined is going to be one of the biggest killer, of people be below, cancer and heart attacks more all of this death. Are going to be in poor countries. In fact, on average in rich country, global warming is actually going to be good for mortality because global warming means milder, milder winters, and people are not going to die during cold spills spells in the winter.

So the impact of climate change are dramatically unequal on this very basic, foundation of life, which is, are you dying from the hot temperature? Uh, when you look at other effect of climate change, for example, the flooding of, of cities that are on the borders, you get the same things more.

Uh, first of all, there are more poor countries that are low lying, and of being flooded. That's Bangladesh, for example. Second of all, they are more, the, the richer countries have more ability to protect themselves. So you compare, for example, Holland, to, to Indonesia and their ability to protect themselves.

Again, rising levels of water is very different. So on the one hand we have a problem which is caused mainly in rich countries. And on the other hand, we have a, a problem that affects mainly poor countries. So we really find ourselves into a very unique situation where countries, which had made a ton of progress in the last 30 years or so in dealing with, poverty, with infant mortality, with maternal mortality, with getting kids into schools and so on, will find themselves in a situation where there are, there's going to be a, a great reversal in a lot of these gains unless we do something.

But it's not, unless the climate change is, is, is, is stopped, but it's not in their power to do so because they don't control the emission. So. The question that is before is, is are we as a world, able to take leadership? And in particular, are we as a world, and as a rich part of the world, able to, take our responsibility for, limiting the problem and also for compensating the poor countries?

So there, unfortunately, the experience of COVID is not very, encouraging, there was basically two things we could have done very early on to limit the problem of COVID and to compensate the poor countries for the impact it had on their economy. One was to ensure very rapid vaccination of everyone.

This didn't happen. And the other was to provide massive financial transfers to the poor countries to help them protect their population in the same way that we were protecting our own population. So during the COVID crisis, the rich countries spend about 24% of their portfolio on fiscal measures to protect their citizens.

The poor country spent about 2% of their GDP to protect their citizens because of course, they didn't have the ability that the rich countries have, to borrow. And nobody came to their rescue even to bring them to the same level of 24%, which would've been so much less money because they are, g Ps are, are so much smaller.

So this kind of suggests to me  that we cannot have, wait until the, the,the crisis is upon us, even more than now, until the disaster strikes repeatedly in those, countries to think that it's time to do something, we need to act now. And we need to act now in those two fronts. First of all, an effort to severely limit emissions in the rich countries.

Second of all, a, a real financial effort to protect, the, the poor countries and to help them. Mitigate, adapt and cope, with the disasters that are already going to happen no matter what we do in the next few years. At the last, cop, there was the creation of, loss and 

damag,, fund, which is, a good first step. Unfortunately, like most of the similar efforts, that have uh, been existing, it's lacked the, a financial mechanism to put any money into this fund. So I think the next, thing to really put on the political agenda, and this is where I would like to, you know, encourage you to put your political, force, your lobbying force, your energy is into getting, a real international financing of this fund.

One mechanism, something that has been proposed, for example, by to, is to have, international taxation of the very, very rich. Whether or not this is possible, I don't know. Something that does seem possible, because we've already done the first step, is an international, taxation of corporations, there was already an international, agreement to have, corporation tax be taxed as at no less than 15% in all the countries.

But in this agreement, all the countries kept the money for, for themselves who were, leveraging the tax. I, I think this, it, it seems to me that it would be possible, and I've made similar points in front of the board of the IMF that didn't seem that it was crazy to think of an international, system of taxation of corporation that would, fund, a fund like a loss and damage fund for the developing country.

I would like to see this, this fund to be larger than loss and damage in the sense that it should be a fund to be spent ex exclusively in developing countries, but to be devoted, not just to, to coping with problems, but also, ideating the, the, the innovative solution of tomorrow to figHEClimate change, which can happen in the poor countries as well, particularly since they don't have in place, the, the outdated infrastructure that's there in the rich countries.

They can leapfrog the bad infrastructure to go straight to the good infrastructure if, they have the money to, to do so. They should do that with the financing of the whole world because by doing that, they're doing a favor to the whole world. Other thing one could, consider doing with, money in this fund is to protect the, the forests.

Um. Protect large waste of forest, that, that exist today that don't need to be cut down, this is possible if, farmers who owns this forest are compensated to do it if, governments are trying to regulate it for regulate farm so that they don't clear cut, have the enforcement capacity to do it, and don't have the temptation of, say, replacing rainforest with palm oil.

Uh, so all of that is possible and to some extent a matter of money. Another thing that is to some extent, a matter of money is to, develop coping solutions that do not make the problem worse at the same time as they, solve it in the short run. One key example of that is air conditioning. Air conditioning is essential to protect people when it's so hot outside, but at the same time, in particular, the older generation, air conditioning emits, ton of floor in the atmosphere, which are terrible for.

Me. Um, when there have been agreement to phase out those terrible air conditioning machines, China and India managed to, obtain, a permission to pre to postpone these adjustments till 2024. And this is really ridiculous because this means that until 2024, this bad machines are going to be sold and they're going to stay in people's home for years contributing to the problem.

It is clearly a matter of money that was not, that was not available or that the rich country were not willing to spend to help, finance, this effort to conclude. I think another thing that such a firm would do is, compensate the terrible ignorance that we have in this framework. The, the climate sector is unfortunately, dominated by a lot of magical thinking.

The idea that, some solution can, technological solution can get us out of the global warming problem without us changing  any of our behavior, I think it's very unlikelythat it's fully true, but I think there is a lot of things that we need to try, we need to try how to change people behavior.

We need to try, which technology are really effective in the field, and which are just effective in the laboratory, which is, less useful, we need to help each country develop, their own innovative solution that works in their countries to protect a citizen, to help them adapt to the new reality and to mitigate the problem in the future.

Uh, my lab, the jal has been working on this issue. We have an initiative called the King, center for Climate Action. Um, I really invite. Each and every one of you of, starting to work on this issue at whatever is your level, there is political action that is needed. There is new science that needs to be developed.

There is new technology that needs to be rolled out. There's new experiments that need to be run. Um, this is a problem that is going to define our generation, not just for the distant future, but frankly as far as the life of the very poor in the world is living for the next, 10 or 20 years. So we need to get going and I count on your energy to, to be part of this.

Um, thank you, esta Flo for, for being here with us tonight and for this enlightening expose. Um, we're very honored to, we are very honored to, to have you here tonight. Um, as you explained, poverty and the ability to fight again, climate change are really intertwined and you suggest in your book, good economics for hot times that we create a.

Green New Deal, basically, which means that we implement measures that, tackle, global, global, climate change as well as, global inequalities. And you just said that we could achieve that by, funding poor countries, especially by taxing corpor corporations, for instance. Could you give us an example or multiple examples of concrete measures that could be adopted in, in poorer countries to fight, quickly, poverty and climate change?

Yes. So I'll give you a couple of examples, so there is one, study by ra, which looks at payment for ecosystem, services. So this is basically, this is a class of, of, of projects that that exists. But, she has evaluated one in Uganda. And the idea is that people, have, have trees on their plots of land.

Uh, they would normally clear them in order to start growing fields, growing things. So for them, they, you know, they need the, the, the, the to grow maize or, to to eat it, or cassava to eat it, or cocoa to sell it, but of course for the world, that's not such a good thing because it's nice to have big trees there.

They are, good for, absorbing the CO2, and so what he, tested is a program where people were enrolled into the, the PS if they wanted to, in a randomized fashion in some villages and not some others. And what she found is, number one, people were a little bit reluctant to enroll in the system, so she didn't have a huge enthusiasm to enroll in the system.

And number two, that despite that, the countries that had the, the villagers where the system was in. Experience a much, lower deforestation than the other countries. And this was not the, the other villages, sorry. And this was not compensated by people starting clearing public forest or something like that.

So this suggests, number one, that this system, when this type of, payment, for eco protect services, if they are well implemented, can really make a difference, and secondly, that there is also progress that we could implement them even better than the way it's done today. So that's one example. Um, another example is, this, actually another, another idea of, so of course this reduces poverty because people are paid directly and this protects the planet at the same time.

And another example is, um. Which reduces poverty and contribute to the adaptation to climate change may, maybe not to the mitigation, but it's also very important, is a project in Niger, in, in the Sahel region that looks at, how to put back in, in, in cultivation area that are severely degraded. So one of the reason why you keep needing to cut forest is that the, the region, the, some areas that have been cut long time ago are now, kind of unusable because they have turned into semi desert.

Um, so this is, this looks at, this is work by Jenny er and Kelsey Jack. They look at something called, these are, basically half moon shape, holes that you can put in a Semitic areas in order to very effectively collect the water, discuss almost no money, but it's costs, some effort. This is like big hole and people also need to understand how to do it.

And they work with pharma to, to teach them how to do it. And they, they found that people, once they know are extraordinarily willing to adopt these technologies, which is not always the case with agricultural technology. Small improvement are generally, people are not so interested, but this ability to, to, you know, produce food where it was not before possible, turns out to be super popular.

So in this case it was, it's just a matter of training farmers, training trainers that can train more farmers and so on. So that's another thing that you directly address poverty, because these are people who live in extreme poverty at the same time as you deal with, climate change adaptation. Thank you.

Okay. So I think we can see here that, to tackle the climate change crisis, we need to change our behaviors and it's not always easy. Um. And I also heard you in many talks saying that, you were actually optimistic that we can change behavior, especially in, rich countries where we know we pollute the most.

Um, and maybe also this question is raised in, poor countries where we need to find good ways to push people, to adapt certain behavior, to align with the, those objectives, but still I feel like the examples of this change are scarce. Um, I mean, many of us, despite being educated, we still struggle

 to adapt the simple, sustainable behavior.Um, we decide that, examples of changing behaviors are scarce because there is a lack of research and implementation of the proper economic and social incentives. So first of all is let's, let's kind of question this premise of whether the example of change are scarce, because if you compare the US to to Europe, you know, Europe, the European Union is about as rich as the us.

The, emission of, of citizens in Europe are so much lower than they are in the US So it's clearly shows and I don't think people are so much as like miserable as a result. So it shows that, conditioning for the amount of disposable income that exists in countries, you can actually, you know, behave quite differently.

First order. So there is a big first it shows that there are big first order possibilities. Now, of course, the US is a much bigger countries. It's getting from, to go from one place to another, you have to take planes or, or trains. But it's, that's not just it, the, so at each level of consumption, the very rich in the us, 

emits so much more than, very rich in Europe. And the middle class in the US emits so much more than the rich in Europe and, and so on. So that shows that actually the, it's like possible to, to, to, to, to go on different, path, even in the relatively recent path that this divergent has taken place. Um, what is, scarr is from the state, from the state where we are either in the US or in Europe.

Uh, significant changes going down on balance. We are, we are probably have picked, which is a good thing, but, the, the slowing down is, is, is much slower than it, than it should be. And I think the reason for that is partly because there is a reluctance to even try, because there is a sense that, oh, people are going to be resistant.

They're not going to want to do that. And uh, in fact, when there was a a, an attempt to have a carbon tax, there was a yellow jacket movement. So after that, the government got very, very scared and didn't want to move, anywhere in this direction. And I think that's an error, that's a mistake. I think people would be willing to change their behavior, but you have to approach it in the right way.

Um, the idea that you would put a, a carbon tax, which would essentially means, higher  gasoline price,, or, force people to retire,the older car is seen, by the poor people, in our country, for example, as a direct attack on them, it's asking them to bear the brunt of the incidents of, of climate change.

And that just never works, similarly in India where, farmers are free electricity, which is terrible because it leads to overuse of electricity and overuse of water, which is bad for them in the pretty short term, it's not going to be good for them. And the attempt to increase the cost of electricity is clearly widely resisted because it is seen as being directly against them.

So there, I think, and it is seen and in a sense it is until we have a very convincing and very well formulated plan. To compensate the poor people, for any, behavior change we demand from, from them. So, for example, if you want people to not drive their, their old car, they need to be a, a really effective transportation system.

You cannot, at the same time, or you can't, but it doesn't work very well. At the same time, reduce the number of, metro and area that comes into Paris and make it essentially unworkable for people to commute by public transport and in the same, at the same time, make it more expensive and more difficult to drive your car.

This is what creates, the, the tension and crisp and, and patients. And there are a few examples of try of doing the tour at the same time. For example, Indonesia got rid of diesel subsidy and all of that money was put into a direct cash transfer to the poor, and that worked. So is it really about finding the good plan of action, the good way to implement a policy that will push people, to change and they will be eager to do it.

And so how, how do we implement, how do we recreate that plan? Uh, do we need the randomized control tries to do it? We don't need a lot of randomized control trials to do it because we have no idea. Exactly. Well, we have very little idea of what will be effective. I'll give you an example. The one plan that exists today, in France is, in weatherization of house houses, you know, improving the installation and so on.

Yes, there, there, there has been, several randomized evaluation of this type of programs in the US in Mexico that don't work, at least they've never worked. Maybe they'll work in France, but we don't know because there is no, is no, evaluation of it as far as I can tell. So a lot of money is put into something that.

Uh, not the most effective way, not out of, you know, I mean out of ignorance in a sense. So we need to, we need to kind of quickly fill up this ignorance. There are some things we already know that are small things we can do, but are already effective. So, like, for example, playing on the social network, showing people how much they consume relative to other people.

We also know that people are creature of habit. So once they start something, it sticks. So, for example, people started driving their bicycles in Paris during the strikes, and they are still driving their bicycles. So large investments, have, a long term, impact in on behavior, so there is a few things we know, but there is a lot we don't know to what are effective levers of behavior.

Yes. And about that because among, sorry, go ahead, sorry. So yeah, because. For the things we don't know. So you suggest we might need a randomized control trial, and I will ask you something. I'm, I'm sure you're used to it, but randomized control tries, designing good incentive is, is costly and it's also a tedious work.

So would you say that it's actually the right way to tackle a crisis that requires urgent action compared to spending a ton of money on things that are ineffective? For sure. Yeah. But, I mean, the amount of money that has been, the amount, the amount of time, you know, compare the, what we know in terms of how to figHEClimate change to what we know in terms of how to fight poverty.

In the last 20 years, there have been so much progress on the fight against poverty. We are so much more cost effective and in climate, nothing. And the all, you know, there are, there is tons of ESG funding that is going to, things that have, you know, as far as we know, are not particularly impactful. And that's a huge waste of money.

So I, it, it, to me, we cannot continue with this state of ignorance. We have to, of course, we have to do, you know, we have to do what we can, as we, as fast as we can. But in the meantime, we also have to build the evidence base. The, the climate, world is so behind, in term of what to do to change behavior.

Uh, that, it is high time we catch up. So it's another call for action for the gal. Um, and many other people it is, yeah, for sure. There are a lot of other people who are doing this type of work. Oh, so, so you talk about changing behavior and you also say on the other hand that, we should not entirely rely on technology and that.

Relying and believing that technology will save us from climate change could actually be dangerous because maybe it will not happen. Um, but you also, warn us that, the  poorest countries need, energy intensive technologies,such as, as you said, air conditioning, for instance, to prevent the economic and human costs of, of the rising of extreme temperatures.

So when they're afford to repair, the damages done to poor countries should reach countries, invest heavily in low carbon adaptation technologies to prevent the trade off between mitigation and, adaptation. Well, what's happening in the poor countries in term of the, the consumption of the poor citizen is really a drop in the bucket.

So yes, I mean, we, as what I was saying when I was talking earlier, we might as well do it in the. You know, we might as well just do the investments, say in electric grid to make sure that the, it's not based on charcoal and so on, in order to leapfrog the, the costly technology. But the reality is that, you know, Africa contributes nothing to climate change.

So if they were to increase a little bit their CO2 emission, that would have pretty much no impact compared to anything that, any behavior change that takes place in the richer countries. India is in a interesting, middle position because it's a big country. It's a become a middle income country, and the technologies are very inefficient.

So it's responsible for a lot of climate change directly. It has also a lot of very rich people who are contributing to the, to the problems themselves, that said, yes. And some of these technologies already exist. For example, they are clean air conditioning machines. Um, and it's, uh. Um, unfortunate that, it's really a matter of money that when there was the agreement on air conditioning in Kigali several years ago, the phasing out, of the bad air conditioning machine, the energy intensive, floor intensive, machines was so slow, in particular in India and China.

And so this is an example of an investment where we already know, we already knew about 10 years ago what needed to be done, and yet we didn't do it. So it's an example of some of an investment that could take place. Another example is, is helping, countries build, hydraulic dams or uh, solar power plants Today.

This is all done in the form of loans and that's why they are not particularly excited to get into that because they are seeing about the impact on their. They're seeing the impact on their  finances down on the line, and we'll go for thecheaper option if it means, less money. So, so are you saying, basically, would you say that it would, developing countries would be better off if rich countries would stop, invent, investing in like miracle technology, and clean technology and will give all their money that they're nowadays, investing in research for cleaner technologies to them to help them fight the consequences of climate change?

Well, I don't think you need all the money, so, you know, I, I do think you need to raise more money anyways. As I said, I think, having a tax on corporations and in particular, or, and if possible, attacks on very, very rich, very rich people would have the advantage that you would raise money that can be given to poor countries for all of these goals.

And in addition would have, you know, would put. Would've an incentive effect on the behavior of these corporations, particularly if the taxes was related to, carbon footprint or carbon, carbon, mitigation, behavior of the firms, which is possible if we had good, if we had good accounting of the, of the, carbon impact of the farms, which is maybe not the case, but could be the case.

So, so I think new money needs to be, needs to be raised, and that would take care of a lot of things, whether or not the country, you know, whether the rich, the rich countries. No, I think the research can continue. We should just not, I'll say something stronger. I think the research should continue into developing better technologies.

Uh, the, the cost of solar, the cost of wind. Has gone down so dramatically in the last few years that it's, it is really, I impactful, even though this is not enough to compensate the, the growth. So we still, we, we still emit, more than we used to, but it would be even worse if we didn't have the big, decrease in the cost of solar and wind.

So by all means, all this technological investment is to continue, but we, we should not hope that it's going to solve the entire problem, which we really, really need to change. Not just how we fuel what we consume, but also how we consume. And the, the problem with a lot of the political discourse in the West, particularly in the US is that they're much more focused on the former, which is you don't have to change anything to your life.

We just have to electrified. And I, I think that's that. That might be a little more optimistic. Okay. Thank you. Um, so we were talking about technologies and uh, I wanted to ask you, since we are at a TC in a business school, maybe, the role of the, the private sector, we see that there's something to do with technologies.

But my question is, because the private sector is driven by profitability, would you say that it is doomed to contribute only, thanks to, solutions that are win-wins? Uh, for instance, energy efficient technologies, or, maybe we can have awards on, so-called impact entrepreneurship that is, that's ambitions to, integrate social and environmental objectives in, corporate, purpose.

So what do you think about that? So I think that ESG has become very big business, and the result of it become very big business is that it's become a business, there are now any number of reports, showing, you know, everything ranging from  greenwashing to pure, manipulation of accounting,manipulation, of uh, ESG and I.

I think the problem we have in the ESG sector is that what has been accepted as a standard of evidence for what nstitute an improvement is just, very murky. It's not at all clear what is impact, what, how we define, how we, we say that we have had an impact. And people and the, in the business world, because we are used to look at profits, which is pretty simple.

The profits, we know how to, it's not so simple, but it's relatively simple. We know how to account for profits. I think there have been, there has been a bit too much of a hope that, measure impact would be similarly easy and you could do it. And, I know for example, that I have never been able to make any progress and to have any reasonable conversation with impact investment about what is impact and are you really sure that, what you are doing or what you are financing in the, under the impact investment wings actually generates impact.

And I think this is the core problem with that entire sector. And until it's addressed, this is going to be under, performing. Even if there are people who are relatively, are very, uh. Well meaning in, in going into this sector, given that I, I, you know, clearly the, the, the corporate sector has a role to play in, I think, more cleaning its own ways of doing things rather than, you know, trying to figure out other, other things to invest in that are clean or something.

But the big corporations have to do their own work in a way that is better for society and better for the climate. And I think they will do that if they are forced by the proper regulatory framework, otherwise the pressure to, to generate profits and to have your action, the, the, the stock market prices go up is too strong.

That's not, that's, that's not human to go against that. So I think it's quite essential that the, again, this puts the politics at the center of it. It's quite essential that we have as societies the willingness, to create, and, and, and impose on corporation the frame, the framework under which they can run their business the best, you know, the way that they want to.

And so that the farms would not have to reinvent it, which is why, again, I think taxation reform, for the purpose of, compensating the, the poor countries is the way to go, which is also why I think that, this, if this taxation is related to a proper accounting of the carbon impact of the firm, that's going to further help.

And then the firms don't have to invent anything. They can just work within the framework of the law. Okay, so regulation is needed and uh, I know you work on, the shortcomings of regulation in India. I think it might be interesting to understand how we can make sure that regulation is effective, if it's actually a good tool to tackle the climate crisis regulation, once it's done, is to be enforced.

Uh, and what ensure that regulation is enforced, it's to have strong institutions and, and to have a trust in governments. So that relates to the next point, which is absolutely critical to make climate. The fight against climate change possible is to have decent trust in government and all over the world.

Trust in government is falling and falling, and falling, and falling, and that's a huge crisis are both in rich countries and in poor countries. So if you don't have trust in government. When something is proposed, which is would be like, for example, new tax, to finance, to, to compensate the victim of climate change, there is going to be immediate mistrust that that money is going to be misused and not spent to the right place.

And so, when there is mistrust in government, there is going to be, the presumption that even if a rule is there on the books, it is not really, it's for sure it's not there in reality, and therefore you can flaunt it, so it's really important and that we kind of work together on rebuilding the trust in government.

Again, what does it, there's no magic bullet to do that, but, political involvement, participating in election, calling your representative, being a candidate, having projects. All of that plays a, a, a part in that from, in my profession, I think my profession has a role to, I, I, I some blame to, to take for this mistrust in government because there is nothing economic, like better than government bashing.

And I think that's, that's, both often unfair because that's forgetting a government deal with very difficult problems like trying to convince firms to do things they don't want to do or people to do things they don't want to do. And, and really dangerous because this has contributed to this general difficulty in getting anything done for government, including enforcing their own regulations.

Thank you. Thank you very much for answering our questions, we're gonna now ask the audience, the online audience and the, real live audience in front of us to ask questions. So if anybody of you have questions, you can raise your hands.

Thank you very much Ms. Delo for tonight. Um, how do we do with corruption? Because, we can raise, maybe a lot of money, but public money needs to be spent according to very precise criterion and, how, wait, if we bypass the states we give this money to, they, well, they, they will, they won't become credible.

But if we give them directly to them, maybe it'll be inefficient because of corruption. So how do we do, how do we distribute this aid? Thank you. Ah, that's a good point, but I, again, this is something that we, we tend to overdo, I think. And I think the over emphasis on corruption and on the risk of corruption is part of the reason why there is such this huge deficit interest of governments.

There is corruption, there is inefficiency, in part it's because government do very difficult things, and there is also corruption in rich countries, plenty of it. And there is also corruption among firms. And in fact, for example, the, an example of both is the, the admission scandals that took place, in the US in top schools some years ago was exactly that was, universities trying to allocate seats, not to the person who can pay the most, but to the person who needed the most, and then the person who could pay more, trying to find a back door entries anyway.

So it shows you the very, very strong pressure, towards corruption in any settings. So how do we deal with it? So the best is to deal with it, by, trying to develop processes that are as corruption free as possible. So treat corruption as another problem to be solved. So in fact, in my research, I've done a lot of, of research on corruption and on trying to alleviate corrupt.

Uh, so for example, we were just talking of the enforcement of environmental regulation in India. There was a system to, regulate the most polluting firm. That system, ha had, a third party auditing system, which has RIF with conflict of interest and led to a lot of corruption of the private forms, actually not of the government in this instance.

And we were able to come up with a system that's much more robust, and not, subject to this conflict of interest. We experimented with it, it was very effective, and then it got scaled up, to the entire state of contract. Another example is, today one way in which you could easily compensate people is to cash transfer going directly to people.

Uh, the technology exists in many countries through, for example, electronic wallets that people have on their cell phone. You could imagine a system that, would have a very mild footprint of the states where when a, a zone is declared to be, a victim of a disaster, climate related disaster, a flood or a drought, people would immediately be, compensated.

So there would be no time for, you know, this would be mechanic, this would be mechanical. There would be no place for judgment. Um, the, you know, satellite images can be used to determine that a place needs to be put in the system. At this point, people would be already registering the system, get the money ready really fast.

So there would be credibility that, oh, this thing is actually working for us, and, the system would be, quite, immune to corruption. So that's an, that's, that's an example of something you could do. And then of course, any other things that, that governments would do, you would, they would have to use their, um.

Uh, usual monitoring system. The, the, if there was a fund, the fund  itself would have its own, mechanism for controllingcorruption, to avoid, these issues. Dr. Dlo here, at, HCC, we've been monitor monitoring the dozens of questions, reigning in from viewers following you on LinkedIn, Facebook, and YouTube, writing from all over the world.

And I'd like to submit a few of them. First of all, Martina, who's a visiting student from India and she's here in Paris, she asks if it's fair to compare the pollution emitted without considering the size of the population. Let's say we compare India and Luxembourg, no, not particularly. That's why it makes sense to, I mean, that's another reason why it makes sense to go back to the individual 

level and to look at, you know, to try to. Basically estimate for each person in the world, no matter where they are, what is their carbon footprint? Then you're going to ask not what's the carbon footprint of India versus Luxembourg, but what's the, what's the carbon footprint of the, of, of a person who happens to be in the, the 10%, of the richest people in India, for example, compared to the 10% richest people in, in the Luxembourg.

So you, if you do that by person, then you don't have this population waiting to skew. Then there's a question that touches on the 10, the 1% at the very top. Pauline and Marsai is asking if we can persuade rich people to act individually and collectively towards fighting poverty and climate change whilst Alexandre in Quebec wonders if you have mechanisms to persuade the richest to turn away from their desire to fly into outer space and focus on solving the problems on earth.

No, I don't. That's why I don't want to rely on it. I don't think we should rely on any individual goodwill. Um, first of all, we know historically that, that very few of people who have the most amounts of money decide to use significant amounts of it to do, to do real good in the world, and we also know that their consumption patterns are bad for the environment.

So. I, I don't think we should wait for them to, to willingly surrender their, their, their, their, their riches. I think that way, that's a little bit hopeless. So that's why, it would be much simpler if we could, if we could text them. I, I don't, I, I continue to think that taxing individual at the worldwide level, is hard.

Not necessarily impossible, but probably difficult, but if one could do that, that would definitely be, be the way to go. Let's turn to, the fact that temperature trends across the entire globe aren't uniform because of the diverse geography on our planet. And so Marcus in Vienna is wondering that, given that, the heating up is not equal everywhere, does it not make it more complicated to figHEClimate change?

I, I think it's a little second order, relative to the, to the fact that the, again, the, the, the, the consequences of the warming are much less for the richer countries. I think this is what makes it difficult because we really need the action to take place mostly in the richer countries, because this is where most of the emissions are, either directly or in the form of, goods that we buy, from poor countries that exports them to us.

Um, but, the, but, but the cost is, is not felt in those countries. So I think that's first order, the fact that, the warming itself is uneven is, is dominated by that. And in term of the, on reaching the danger zone of temperature that is also dominated by the fact that, of how cool, how hot is already today, as opposed to how much the warming will be in different places.

I've read, that you've called on, I believe, slower growth, but, Timo in Paris is wondering what your view is on Degrowth to address climate change and its impact on poverty. I think we just should stop, worrying too much about growth one way or the other, we used to be obsessed by growth as the measure of success and, a lot of, eil was done in the, in the name of economic growth,  including, for example, tolerating a hugeincrease in inequality, in the us in the uk, even in Europe, a little less so.

Um, in the name of, of, of, and in poor countries, similar temptations exist that you need to create the conditions for the, you know, bridge to become richer so that they, they have the incentive to create the technology that are going to bring growth. All of that has been pretty damaging without necessarily creating much growth.

Similarly, calling for de growth seems to be, similarly, unproductive in the sense that it's not that we control growth. No one knows how growth happens or doesn't happen or, or de growth happen. We also don't know how to do that. So we should just think about directly about what's the, what are the objectives and the objective should be, in my opinion, the welfare of the poorest people in the world.

And, we should do, things that, that leads to that both in the short run and in the longer run. In particular by avoiding making the planet inevitable where they live. Um, so in some countries, you, you might, this might lead to the richer people growing their income less fast, but the poor people growing their income faster.

In some countries that are very, very poor, it might lead everybody growing, ideally. Um, but as long as we keep our eyes on what's the objective, which is welfare, how long people live, whether they live good lives, whether they, they, they, they are, they feel, empowered to, to, to live their life the way they want, then that's, those are the right questions to ask as opposed to going always back to this very aggregate, somewhat abstract concept of growth, the growth, et cetera, that we do not control anyways, that are not really policy instruments.

Uh, yes. Hello, Mrs. Duflo, is here. Hi. Hi, so first of all, it's a great honor to talk to you because, your book economy really inspired me at a time where I, I was about to give up on my studies, so thank you. And my question is, sometimes when we compare ourselves Europeans to on, on the One Side America and on the other one China, it feels as though we have most of the good ideas, but none of the influence.

So is there any leverage that Europe has to be the leading contributor to a slightly less warm, slightly more, equal tomorrow? Uh, first of all, thank you for sharing this, this, story about your life. I'm very, I feel very. Very heartened, if, our book did that, that's already one thing it did.

So that's, that's, that's very nice to, to share, so of all, you know, I think we need to be a little less, proud of our achievement in Europe. Yeah, true enough, the, on, on average, we, we, emit less than people do in the us but the rich people in Europe emit as much as the middle class in the US So there is also work we can do in Europe and we should do it.

And it's already, you know, the European emissions are not negligible in the worldwide emission. So there is plenty of work we can do for ourselves, that will require a, a, a change in behavior, and then there is the hope that, this will also, 

inspire others to do, similar things in particular. Countries that have not yet completely set, their growth path and, and the way they want to set up their, their, their investment and their infrastructure investment. So that's China, that's India, et cetera, which now find it easy to say, what, who are you to tell us to develop differently? You, you're still, you know, you're still responsible for most of the problems.

Um, thank you professor for your time, tonight. So I wanted to weigh on, or ask about the behavioral change versus technology solution debate and taking your own two statements, first, the one with the, where you said French people are only willing to abandon, abandon their car if a rare is offered, which is a technological solution.

And then second, you're saying we shouldn't rely on the goodwill of people. Um, isn't every behavioral change technology based as people only opt for another option if it increases their level of, welfare? So isn't every behavioral change needs to be provided by a base technologically solution. If you define technology in this in a very, very broad sense, then then that becomes true By, by definition.

Uh, but if you're talking about the error now, it's not a matter of technology. Technology is there the, the error already there, the, the problem with the error is that there are not enough people who actually run them. The, they're not reliable enough. The investment in the, in the tracks has not been done.

The, so it's not a matter of inventing a new way to do things. It's a matter of putting the human and financial resources behind having a system that is effectively working. So in that sense that I don't think that's, you are right. If the error technology didn't exist, we should invent it. That's a pretty good one.

Uh, but it's, at this point, it's really a matter of. Politic policy, politics, humans, organization, industrial organization, maybe, and not technologies. Um, a lot of the behavior change are about, you know, we probably be about consuming less and consuming differently. So for example, you know, there was all this discussion this summer about people taking plane for short distance.

Uh, there is, the people have probably the ability to, purchase fewer things that, you know, they probably purchase more things than they need an or use. And all of that is more about behavior than about, than about technologies, right? Uh, sometimes the technology can help support a change in behavior.

For example, you know, these ideas that people can consume less energy when you send them a letter to tell them how much they consume relative to the ne to their neighbors. Um, first of all, you need a letter that's a form of technology. Second, the way they do that is by putting their thermostat lower, and that's the technology.

So they are, you know, to say that, this, the two are, completely distinct is neither here nor there. And I didn't say you can trust people to do the right thing. I said, you can trust rich people to do the right thing. Can I ask a follow up question on that? Um, so I, I'm not motivating. Okay. If you take the time, I, I, I'd like to take the opportunity, I wanna ask if there's any empirical, proof that people are actually willing to consume less right now, if the COVID scene that within two and a half years, flights are back to the pre COVID levels, although the world's getting better educated, knows more about climate change and, and the impact of air travel on climate change, so, isn't this another field where we definitely need a technological solution?

We can't rely on people consuming less. I, I don't, I think there are plenty of examples that, people's consumption is, is not, that peoples don't have very, people don't have very strong preferences and don't have very strong expectation of what their life should be. And that there is not necessarily a, and in the idea that is very fundamental to economics, that more is always better, is not necessarily the way that people behave.

So, we have a lot of this discussion in economics in the, in, in, in, in chapter, in chapter four, which is called likes, wants, and Needs, which tries to show precisely that how you decide to, you know, there's plenty of evidence from sociology, from psychology and from economics that the way that you decide what's an acceptable level and mode of consumption is first of all, extraordinary, socially determined.

So it's like depends on what people are doing around you, and second of all is also very habit forming. So we kind of tend to continue to do what we have always, done. So that's why you have, you can have now a very, very different consumption profile in Europe and in the us and yet the European are being not particularly 

unhappy or after the, compared to the Americans.We think, from the way it's measure. So in term of, in term of example, so the, for example, this again, this, getting a letter for how much you electricity you consume, that affects people consumption of electricity, and then it's that that effect persists after you stop sending people letters.

So that shows both that people are willing to consume less and that they are, and that this, this changes, are persisted over time. So now part of this is because they use better the technology at, at their disposal. Part of it is also because they choose to, to have their house a little bit, cooler in the winter and warmer in the, in the summer and they wear sweaters and so on.

So, you can call that technology, but uh, it's mainly about, it's mainly about behavior. So was there, you asked me whether, so you, whether is it's enough, no, it's not enough. But, the, but there are example of durable changes. I was fully convinced that the COVID changes would not last because they were under so extraordinary circumstances that  people were jus,, too, eager to go back to,to some notion of pre, it's different when in a sense the changes are assured by, kind of a social move, regulation move, a political move towards the particular equilibrium.

Thank you. I think we have time for two more questions. Two more last questions from the audience, hi. This is, and thank you so much for this brilliant talk. So, you've been mentioned there's currently a funding gap to like, tackling the inequality between developed and developing economies, and there's a funding gap in like, bringing real impact, impact impactful changes.

And maybe it's not the time to start taxing everyone. However, there are some global measures, I think, in this view that are trying to, tackle the funding gap. For example, the offset market as BTI or like, natural capital, a sustainable linked bank. Um, I'm thinking among these measures, do you find that maybe some of them have the potential to actually delivering the real impact?

Or if not, what do you think needs to be put in place and thank you? Well, I think that really remains to be seen, and I'm a little doubtful, because a lot of these measures basically are put in place to try and say, kind of demonstrate that we are doing something. Um, and then when you look, when you try and trace what is being done with that money, it's uh, little bit, disappointing perhaps, in, in large part because the climate change world is, is driven by this techno optimism we discussed and by, a lack of willingness to confront, possible.

So, financial or technological to, to the field. So there was a very interesting article in The Guardian, several weeks ago that looked at the projects that are funded by, Vera, which is an intermediary that, that, supports a lot of the payment for eco uh, ecosystem services that I gave you an example that was successful, but there are many, many, many examples that are less so.

And what this study concluded is that the Vera Project contributed exactly zero to, protecting the forests. And it's, I think, not an accident. I think it's a structure of, it's a, it's a consequence of the way that, this funding is structured where, basically the reward are given by pretending to have an impact regardless whether you have one or not.

And, the. Nobody is there to really represent the interest of the planet or the interest of poor people, so I think the system, these, these systems are pretty flawed for that reason. And I think the, the last few cups have really been characterized by, first of all, not following up on 

commitment that we are done, vis-a-vis the pool. So the a hundred billion, a year commitment that was made in Copenhagen years ago was not, never fulfilled and then finally not renewed in Glasgow. And then it became the loss and damage fund, which was put in place without much funding attached to it at all. And to the extent there is any effort of funding, it's to this like market mechanism that don't go with appropriate, safeguards.

So it becomes a fig leaf. And that's problematic. That's why I think we should go to, straight tax, and try to make, good use of the money that is being raised that way.

Hello? Uh, hi Esther. Thank you so much for your session, I had two questions, one is you mentioned about taxation, but don't you think there is a fundamental flaw in financing through taxation? Because in a way it's penalizing the businesses who are making money rather, don't you think? Access to capital and access to technology.

Low cost capital, I would say where for each countries, like for example, if about 97 countries in the world are stuck in debt, trap, Chinese debt where like high cost opaque funds are given to those countries and they're not able to get out of it. So rather, don't you think low cost capital to these companies?

Like probably corporations can give something like, CSR activities where they can fund the. Technologies as well as the fi uh, capital in a low cost manner. Like for example, how Japan is doing in the Sian countries where they, they are focusing is on also on the sg SDGs as well as improving the daily life of the people.

So don't you think that would be a much better way rather than, I would say just purely taxing, doing taxation on the companies. And the second part I wanted to ask is, I would like to know your thoughts about how India is handling the energy transition in like, multi-pronged way, like where the farm is not like farmers are not just considered as food providers, but also energy providers.

So where they are trying to infuse bioethanol into petroleum. So rather than, so where there is much, rather than depending on the fossil fuel, you are trying to create other avenues rather than just electrification.

Uh, so I think you misunderstand taxation. Taxation is not penalizing business for making money. Taxation is asking business to contribute, for the global public goods that they are using, and, and repay, you know, repaying the rest of us and the rest of the planet in this way. So in every country of the world, business are taxed.

Uh, and this taxation of the business allows to provide, you know, workers with a train that give them to the business and business with roads that they can use to, drive their trucks, to send their things and to pay for the army that protects the business and so on. So, the idea of taxing businesses is just absolutely fundamental to the way that we operate as societies.

It's not about penalizing, it's about contributing, the, the part that has not been, yet, incorporated in the taxation of business is the fact that. In the course of their operation. And by making, in the way, in the way that they're making money, they're also depleting our collective, asset, which is the health of the planet.

So all I'm proposing is to include, in the taxation system, this component of public good that is being used for by the businesses. I think it is the way you should think about taxation and forget the punishing for making money. This is, that's a not a very productive framework. Then there is a worry that okay, fine, but this is going to reduce their incentives to, invent and innovate and so on.

There is in, so, so that's a legitimate question and that's why there is a tension between how much we should tax, individual or corporations. Um, to, to continue giving them a, an incentive to, to act and to innovate and to be effective. But the, the evidence success that the elasticities of effort or innovation with respect to tax credit is very, very low.

What is high is the elasticity of, of fleeing a country. So when the country has a tried to impose a higher tax rate, the company moved to tax savings. That's why it would be nice to have. And with the, there was an effort to have a minimum, international tax rates, that was a good first steps. And then once you have that, you can just say, well, a part of this taxation is actually going to be used to, finance, global public goods in particular, a decent environment, for the world.

Okay. Thank you so much. Thank you everyone for, for being here online in, in real life. Thank you, Estel Flu for being here with us. It was really an honor, we hope that you, we, you all have a good night and Estel flu. You have a good afternoon, I guess. Um, thank you very much. Thank you. Thank you.