Economics recommends combating climate change with carbon pricing (tax, allowances, offsets), but green finance (sustainable finance regulation, ESG investing) is becoming widespread. In a unified model, I show that the social optimum is achieved by a common carbon price levied on scope 1 emissions and no green finance interventions. Green finance can be useful when the carbon tax is too low, but does not flow through the supply chain as desired, creating a need for measuring scope 2 and 3 emissions. Using novel data, I link climate approaches to societal conditions and document a violation of the law of one price due to lacking offset credibility.
Room REC M4.02
- Lasse Heje Pedersen (Copenhagen Business School)
1018 TV Amsterdam