IMD-OWPLIVE22-PostEvent-Report

→Sustainability

ACTION POINTS

1

Policymakers must impose higher carbon taxes to reduce the likelihood of severe climate disasters in the near-term future.

2 3

Companies must tie bonuses to “green” key performance indicators (KPIs) to make executives accountable for the environmental impact of their actions. Businesses must engage in collaborations with their peers so as to set higher environmental standards in their industries.

RECOMMENDED READING

HOW TO AVOID A CLIMATE DISASTER: THE SOLUTIONS WE HAVE AND THE BREAKTHROUGHS WE NEED By Bill Gates (Penguin Random House, 23 February, 2021) LESS IS MORE: HOWDEGROWTH WILL SAVE THE WORLD By Jason Hickel (Penguin Random House, 13 August, 2020)

Many studies have tried to estimate the SCC using so- called integrated assessment models (IAMs), which integrate climate models with economic models. However, IAMs are a gross simplification of the interdependence between economic activities and climate change. In a forthcoming paper with co-authors, I provide a new methodology for the estimation of the social cost of

carbon — an important figure in the discussion on climate change. Our model strongly suggests that current carbon taxes are much too low. The price of carbon in the EU’s emission trading system has widely fluctuated in recent months because of the turmoil in energy markets since Russia’s invasion of Ukraine. While policy interventions may lead to price declines in the short run, carbon prices

must rise again over longer time periods. Companies should not expect permanently low carbon prices. Instead, they are well advised to begin planning ahead for considerably higher prices in a few years.

24

25