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    Stockholm School of Economics Provides Concrete Guidance

    Stockholm (NordSIP) – The aftermath of the alarmingly definitive IPCC report last week has left many policymakers and businesspeople asking themselves in earnest what more they can do to combat climate change. To help guide their efforts, Stockholm School of Economics (Handelshögskolan i Stockholm) issued an official press release on Monday, August the 16th, suggesting five concrete measures for reducing carbon emissions. It is a welcome roundup of possible solutions currently debated by leading economists.

    The author of the summary, Julius Andersson, PhD, a researcher at Stockholm Institute of Transition Economics and an affiliated researcher at Mistra Center for Sustainable Markets, briefly discusses each measure and provides links to research papers that dive deeper into the topic.

    “Make carbon pricing fair” is the first piece of advice suggested by economists. Carbon pricing has long been economists’ tool of choice. With a 30-year track record of successfully implementing carbon taxes, Sweden provides an excellent example that the approach works. However, the uptake in other countries has been somewhat slow, mainly due to concerns about a disproportional tax burden on low-income households. To mitigate such an effect and increase fairness, leading economists suggest a new system of ‘carbon dividends’ to be redistributed back to taxpayers.

    The second recommendation, courtesy of William Nordhaus, Sterling Professor of Economics at Yale University, is to create international ‘climate clubs’. Backed by economic theory and empirical modelling, the scientist suggests that a club model would help avoid free-riding and enhance global solutions by introducing minor penalties on non-participants. Implementing border adjustment taxes, for instance, would be a step in this direction.

    Tackling other sources of greenhouse gas emissions, besides fossil fuels, is another measure that scientists advocate. Citing a recent study from the Swedish Environmental Protection Agency (Naturvårdsverket), Andersson comments that extending the current Swedish carbon tax to include food products might reduce the food industry’s greenhouse gas emissions, such as emissions of methane and nitrous oxide from meat production, by around 10 per cent.

    And if the whip of taxes is not a politically viable alternative, the scientists suggest using green technology subsidies as a carrot instead. Examples of successful campaigns, from Norway’s generous EV incentives to promoting solar panels across the globe, abound. According to the press release, even technologies that are yet to be proven, such as carbon capture and storage (CCS), should benefit from subsidies.

    Ending up on a more controversial note, the summary re-examines the case for nuclear energy as a source of low-carbon energy production. According to Andersson, given the increasing trend in cost for nuclear technology, its role as an efficient tool to mitigate climate change remains contentious.

    The solutions suggested by Stockholm School of Economics are neither new nor radical. They have, however, the advantage of years of solid research and the endorsement of a body of scientists behind them. It might, therefore, be a good idea to heed the advice.

    Image by AbsolutVision on Unsplash

    Julia Axelsson
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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