Podcast Highlights Climate Change Policy with Lasse Heje Pedersen

Key Findings from the Paper
In Lasse Heje Pedersen's paper 'Carbon Pricing versus Green Finance', he examines the best tools to combat climate change, comparing carbon pricing mechanisms like taxes and offsets with green finance options such as ESG investing. His unified model shows that an optimal social outcome is achieved by implementing a common carbon price on scope 1 emissions — those directly related to what a company burns — without relying on green finance interventions.

The research suggests that green finance can be an alternative when effective carbon pricing is unavailable. Wealthier countries tend to have higher carbon prices and more ESG investing, with carbon pricing positively linked to democracy and awareness of global warming, and negatively linked to carbon emissions.

Policy Implications
Pedersen emphasizes that governments should prioritize effective carbon pricing to combat climate change, ensuring comprehensive coverage and accurate reflection of social costs. Without this, capital owners might resort to the less efficient route of green finance.

Podcast Discussion
The podcast highlights the gap in current carbon taxation policies, with less than a quarter of global emissions priced adequately. Pedersen discusses how much climate finance is needed to bridge this gap and achieve net zero emissions, providing a roadmap for policymakers.

For more details, listen to the latest episode of the CEPR podcast VoxTalks featuring Lasse Heje Pedersen.