The need for a price on carbon
This session looked at the expected sustainability policies in 2021 and the important role of a price on carbon as part of that. The winner of the Nobel Prize for his work on “integrating climate change into long-run macroeconomic analysis” outlined the best approach, as well as the idea of an international climate compact to bring countries and policies together.
Professor William Nordhaus
Sterling Professor of Economics, Yale University; 2018 Nobel Prize winner in Economics (United States)
William Nordhaus was born in Albuquerque, New Mexico and completed his undergraduate work at Yale University in 1963 and received his Ph.D. in Economics in 1967 from the Massachusetts Institute of Technology, Cambridge, USA. He has been on the faculty of Yale University since 1967 and has been Full Professor of Economics since 1973 and also is Professor in Yale’s School of Forestry and Environmental Studies. Professor Nordhaus lives in downtown New Haven with his wife Barbara, who works at the Yale Child Study Center. He won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 for integrating climate change into long-run macroeconomic analysis.
He is a member of the National Academy of Sciences and a Fellow of the American Academy of Arts and Sciences. He is on the research staff of the National Bureau of Economic Research and has been a member and senior advisor of the Brookings Panel on Economic Activity, Washington, D.C. since 1972. Professor Nordhaus is current or past editor of several scientific journals and has served on the executive committees of the American Economic Association and the Eastern Economic Association. He serves on the Congressional Budget Office Panel of Economic Experts and was the first chair of the advisory committee for the Bureau of Economic Analysis. He was the first chair of the newly formed American Economic Association Committee on Federal Statistics. In 2004, he was awarded the prize of “Distinguished Fellow” by the American Economic Association.
From 1977 to 1979, he was a Member of the President’s Council of Economic Advisers. From 1986 to 1988, he served as the Provost of Yale University. He has served on several committees of the National Academy of Sciences including the committee on Nuclear and Alternative Energy Systems, the panel on Policy Implications of Greenhouse Warming, the committee on National Statistics, the committee on Data and Research on Illegal Drugs, and the committee on the Implications for Science and Society of Abrupt Climate Change. He recently chaired a panel of the National Academy of Sciences which produced a report, Nature’s Numbers, that recommended approaches to integrate environmental and other non-market activity into the national economic accounts. More recently, he has directed the Yale Project on Non-Market Accounting, supported by the Glaser Foundation.
He is the author of many books, among them Invention, Growth and Welfare, Is Growth Obsolete?, The Efficient Use of Energy Resources, Reforming Federal Regulation, Managing the Global Commons, Warming the World, and (joint with Paul Samuelson) the classic textbook, Economics, whose nineteenth edition was published in 2009. His research has focused on economic growth and natural resources, the economics of climate change, as well as the resource constraints on economic growth. Since the 1970s, he has developed economic approaches to global warming, including the construction of integrated economic and scientific models (the DICE and RICE models) to determine the efficient path for coping with climate change, with the latest vintage, DICE-2007, published in A Question of Balance (Yale University Press, 2008). Professor Nordhaus has also studied wage and price behaviour, health economics, augmented national accounting, the political business cycle, productivity, and the “new economy.” His 1996 study of the economic history of lighting back to Babylonian times found that the measurement of long-term economic growth has been significantly underestimated. He returned to Mesopotamian economics with a study, published in 2002 before the war, of the costs of the U.S. war in Iraq, projecting a cost as high as $2 trillion. Recently, he has undertaken the “G-Econ project,” which provides the first comprehensive measures of economic activity at a geophysical scale.
White is responsible for the content across all Conexus Financial’s institutional media and events. She is responsible for directing the bi-annual Fiduciary Investors Symposium which challenges global investors on investment best practice and aims to place the responsibilities of investors in wider societal, and political contexts, as well as promote the long-term stability of markets and sustainable retirement incomes. She is the editor of www.top1000funds.com, the online news and analysis site for the world’s largest institutional investors. White has been an investment journalist for more than 20 years and has edited industry journals including Investment & Technology, Investor Weekly and MasterFunds Quarterly. She was previously editorial director of InvestorInfo and has worked as a freelance journalist for the Australian Financial Review, CFO, Asset and Asia Asset Management. She has a Bachelor of Economics from Sydney University and a Master of Arts in Journalism from the University of Technology, Sydney. She was previously a columnist for the Canadian publication, Corporate Knights, which is distributed by the Globe and Mail and The Washington Post. White is currently a fellow in the Finance Leaders Fellowship at the Aspen Institute. The two-year program consists of 22 fellows and seeks to develop the next generation of responsible, community-spirited leaders in the global finance industry.
- Since 1900, CO2 emissions have increased 2.8 per cent per year. If this path continues, we will get nowhere near our global targets.
- Unregulated markets have failed because CO2 is priced at zero which is wrong. To increase the price of carbon, we could introduce carbon taxes. Carbon taxes would be a better goal that carbon emissions.
- History is littered with failings in international negotiation, so we must be patient and not fall victim to short-term thinking.Nonetheless, the path we have been going down for international negotiations is a dead end. We are on square zero. We need to change the goal and change the vision. Current agreements have no sticks and few carrots. We need more of both. We need a set of climate treaties that provide benefits for participation and costs for non-participation. Roosevelt said speak softly and carry a large stick. In contrast, we are speaking loudly and carrying no stick at all.
- Research from McKinsey shows that CO2 emissions can be reduced by between 10 and 30 per cent for nearly no cost. There are many similar ‘no regrets’ actions that we could all take to improve the status quo.
- We need to reconceptualise how we deal with climate change on a global level. This is a collective action problem. We need to convince our governments and commercial partners to do more.