by Maayan Jaffe-Hoffman
“Time is money,” Wagner said. “The beauty and ugliness of compound economic growth mean that early action is significantly more valuable than most think. We saw the warp-speed version during COVID-19, where the action was measured in days, or weeks. With climate, it’s years and decades, but the logic is no different. Act early, and the benefits will be exponentially larger.”
“Learning by doing means that the more we cut emissions, the better we get at cutting emissions, making cutting emissions cheaper,” Wagner told The Jerusalem Post. “It is crucial to include those factors in any model like this. We are not the first to do this, but we show how important this step is.”
“When you treat carbon in the atmosphere like an asset with a negative payoff and apply standard asset pricing models, you get that risk and uncertainty dominate,” Wagner explained. “In other words, we know enough to act, but the stuff we do not know makes things even worse.”
“The social cost of carbon, the external cost, is indeed very large, and yes, it should be polluters paying rather than society,” Wagner said. “For example, look at flights. Don’t ban them, but view them as a high-value activity that also causes lots of pollution. It is OK to fly as long as you pay for the cost.”
“Investing in clean over dirty is investing in technologies over commodities. Commodities like oil, coal and gas will always fluctuate, posing enormous risks and uncertainties. Technologies, meanwhile, can only improve over time. We won’t unlearn. Solar, wind, batteries, etc., will get cheaper and better over time,” Wagner said.
“Total additional money, though, is significantly smaller,” Wagner said. “In McKinsey’s case, it is the $25 trillion over 30 years or less than $1 trillion per year globally. There are hurdles aplenty, especially the large shifts necessary from dirty to clean, but is there enough money in the world to get the world to net zero? Yes.”
Quoted in: “Drastic cut in climate pollution is best path to economic growth – study” by Maayan Jaffe-Hoffman, Jerusalem Post (15 April 2023)
Paper: “Carbon dioxide as a Risky Asset” with Adam M. Bauer and Cristian Proistosescu