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Topic: Carbon Tax

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[Episode #193] – Harmonizing EU and US Climate Policies

Mar 8 2023

As the European Union and the United States work toward stronger climate policies, their two divergent approaches are creating tension. The EU has opted for a mix of rewards and penalties to incentivize green industries while also taxing carbon emissions from domestic industries - a “carrots and sticks” approach. On the other hand, the US is only offering rewards because Congress can't assemble a sufficient majority to agree on taxing carbon emissions from its industries; in other words, a carrots-only approach.

These contrasting approaches to climate policy have agitated trade discussions between the US and Europe, as shown by the recent passage of the $369 billion Inflation Reduction Act in the US, which European leaders worry might make their trade position weaker.

But another policy is now rising to the forefront as a source of trade tension: Europe's Carbon Border Adjustment Mechanism (or CBAM), which will impose tariffs on goods imported to Europe based on their embedded carbon emissions. The CBAM works to prevent "carbon leakage" by ensuring that European producers who pay carbon taxes won't be disadvantaged compared to others who don't.

In this conversation, we are joined by Noah Kaufman, an economist and research scholar at SIPA’s Center on Global Energy Policy at Columbia University who served in the White House under both President Biden and President Obama, to discuss the challenges of accounting for the embedded carbon emissions in various goods, as well as how the EU and the US can find common ground and harmonize their climate policies.

Geek rating: 2

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[Episode #180] – Transition in Alberta

Aug 31 2022

Full Episode

Alberta is the seat of the Canadian oil & gas industry, as well as a major coal producer, so it has historically struggled to align with the energy transition - focusing more on pipelines than turbines. But Alberta is changing. Now, the province has implemented numerous policies designed to support the transition, installing a significant amount of wind and solar power generation capacity. According to the Alberta Electric System Operator, 14% of the province’s electricity generation in 2020 was from renewable energy sources such as wind, hydro and solar.

In this episode, we are joined by energy expert Dr. Sara Hastings-Simon to discuss the challenges and opportunities for energy transition in Alberta. She is an Assistant Professor in the Department of Physics and Astronomy and School of Public Policy at the University of Calgary in Alberta, Canada, where she directs the Masters of Sustainable Energy Development program. She is an expert in energy, innovation, and climate policy, and her work is focused on understanding how energy and industrial transitions happen within different sectors of the economy, and how policy responses can improve outcomes. She is also the co-host of the Energy vs. Climate podcast, which will run this conversation on their podcast feed as well.

We talk about the recent history of the various efforts to build pipelines and LNG facilities to export more Canadian oil and gas; the outlook for exports of hydropower; the progress of Canada’s coal phase-out; and the potential for expanding renewable generation in the province, including geothermal. Sara also shares her perspective on how Canada’s carbon tax regime has played out.

Geek rating: 5

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[Episode #135] – Internalizing Climate Risk

Nov 25 2020

Mini Episode

Climate change poses a host of risks to the global economy. From ‘natural’ disasters causing property damage, to climate mitigation measures rendering fossil fuel assets unburnable, to potential impacts of climate change on agricultural production, energy, food, insurance, real estate, and other sectors, it’s clear that private sector companies and all kinds of investments stand to suffer significant losses as a consequence of climate change.

Yet few regulations exist to require these risks to be recognized on balance sheets, or disclosed to investors, unlike many other everyday risks that are subject to such disclosure and protection. A home built in a floodplain and destroyed in a flood, or at a wildland interface and destroyed by a wildfire, has not seen its cost of insurance go up to reflect the rising risk of another loss due to climate change. Pension funds have not been required to evaluate the risk of their investments in oil, gas, and coal companies losing value due to future restrictions on carbon emissions. And entities like the U.S. Federal Reserve have been free to continue lending to fossil fuel producers even as they warn about the damage that climate change is doing to the global economy.

Clearly, it is long past time to recognize the risk of climate change across all sectors of the economy. We must begin implementing ways of measuring those risks, testing portfolios for their risk tolerance, divesting public money from the fossil fuel sector, and start implementing economy-wide ways of pricing carbon emissions.

To that end, in 2019 the U. S. Commodity Futures Trading Commission (CFTC) formed the Climate-Related Market Risk Subcommittee, and tasked it with producing a report to consider what climate-related risks might be; examine whether adequate information about climate risks is available; identify any impediments to evaluating and managing climate-related financial and market risks; ask whether the market can do a better job of integrating climate-related scenarios and use them to stress-test investments; incorporate disclosures of climate risk into financial and market risk assessments and reporting; identify how risks can be managed and disclosed in order to protect the stability of the financial system; and ensure that information about climate-related financial and market risks are internalized into the market.

On September 9, 2020, that report was released. In this episode, we speak with the chairman of the subcommittee, Bob Litterman, founding partner and Risk Committee Chairman of Kepos Capital. Bob has had a decades-long career in risk management, and has been a champion of recognizing and integrating climate risk for many years. We’ll ask him about what the report says, why it’s important, and how its findings might be used to integrate awareness of climate risk into financial metrics and enterprise governance.

Geek rating: 6

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