The Economics of Climate Change
The UN Climate Conference, COP26, provides the perfect backdrop for our latest episode of the Agenda podcast. Many countries around the world are signing up to targets aimed at achieving net zero greenhouse gas emissions, while the world is also in the grip of an energy crisis.
On this podcast, we discuss how economics can help to address the trade-offs between the long- and short-term objectives that are facing policymakers and businesses.
Joining Russell Goldsmith on the podcast is Sir Philip Lowe, an Oxera Partner based in Brussels, alongside Dr Luis Correia da Silva, Partner in Corporate Purpose and Finance, and Sahar Shamsi and Jostein Kristensen, who jointly head Oxera’s Climate Economics practice.
On the podcast, Sir Philip Lowe asked:
‘You may set a target, but have you got a strategy to achieve it? And how do you implement that strategy in an effective way? This is where I think climate economics is a prism through which the logic and the rigor of strategies to reach net zero objectives can be measured. It is a very complex affair; achieving national objectives in terms of CO2 emissions has to be done through partnership between national governments, regional and local authorities, but also agencies.’
Dr Luis Correia da Silva suggested that the key to successfully implementing strategies lies with the ‘fundamental change [that] needs to take place at the corporation level’. He continued: ‘The role of and composition of boards are important and will need to change. Perhaps we need to have much more diversity of people, skills, and understanding of the social issues’ to galvanise change.
Speaking about the present energy crisis, Jostein Kristensen said:
‘In Europe, this year, we’ve had less renewable electricity generation—for example, notably lower wind generation and reductions in hydro electricity generation. This is true in some of the major economies around the world that have a high degree of gas dependence. With these changes, which are possibly driven by changes to the climate, we might expect there to be continuing risks to renewable electricity generation in the future.’
Sahar Shamsi went on to explain the ‘trilemma’, as it’s referred to in the energy markets, of ‘simultaneously achieving affordability, security of supply and decarbonisation’, and that although the present focus is on vulnerabilities in the energy supply chain, the climate challenge is not limited to energy sector. Sahar also noted that those considering decarbonisation solutions always have to be thinking: ‘does my solution to the problem cause any other problems?’