How can financial markets help us tackle climate change

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Transcript of How can financial markets help us tackle climate change

Figure SPM.7a Global average surface temperature change

Figure SPM.8a,b Maps of CMIP5 multi-model mean results

Carbon pricing helps align private and social incentives by internalising the

negative externality

Political apetite will vary for different market-based instruments

𝑇𝑝 =πœ†π‘

1βˆ’π‘”βˆ™ 5.35𝑙𝑛 βˆ™ 1 +

𝐴𝑝𝑄𝑝

𝐢𝐴0+ 𝑅𝑁𝑝

With 𝑔 =5.35πœ†π‘ 𝛾

𝐢𝐴0+𝐴𝑝𝑄𝑝

𝑄 𝑑 = 𝑄 𝑑1 +πΈπ‘šβˆ’π‘’π‘Ÿβˆ™(𝑑1βˆ’π‘‘π‘š)

π‘Ÿ+

πΈπ‘šβˆ™ βˆ’π‘’π‘šβˆ™ π‘‘π‘šβˆ’π‘‘ βˆ™ π‘šβˆ™ π‘š+π‘Ÿ βˆ™ π‘‘βˆ’π‘‘π‘š +2 +π‘Ÿ +2π‘š+π‘Ÿ

π‘š2

𝐸 𝑑 =

π‘œπ‘π‘ π‘’π‘Ÿπ‘£π‘Žπ‘‘π‘–π‘œπ‘›π‘ πΈπ‘š βˆ™ π‘’π‘Ÿβˆ™(π‘‘βˆ’π‘‘π‘š)

𝑓 𝑑With 𝑓 𝑑 = πΈπ‘š βˆ™ [1 + π‘Ÿ + π‘š βˆ™ 𝑑 βˆ’ π‘‘π‘š ] βˆ™

π‘’βˆ’π‘šβˆ™(π‘‘βˆ’π‘‘π‘š)

π‘ž 𝑖,𝑑 = 𝐸(𝑑) βˆ™ 𝛼𝑑FS𝑖,𝑑 + (1 βˆ’ 𝛼𝑑)GS𝑖,𝑑

FS𝑖,𝑑 =π‘π‘œπ‘π‘’π‘™π‘Žπ‘‘π‘–π‘œπ‘›π‘–,𝑑

π‘π‘œπ‘π‘’π‘™π‘Žπ‘‘π‘–π‘œπ‘›π‘–,𝑑

GS𝑖,𝑑 =π‘žπ‘–,2009

π‘žπ‘–,2009

𝛼𝑑

βœ‰