Carbon Markets & Net Zero

Watch

• How do carbon markets work? ↗The Economist
• What is net zero? ↗The Economist
• Climate Change: Your carbon footprint explained - BBC News ↗BBC News
• Counting medicines’ carbon emissions - Nature's Building Blocks | BBC StoryWorks ↗BBC StoryWorks
• China’s Next Economic Transformation: Going Carbon Neutral by 2060 | WSJ ↗The Wall Street Journal
• Carbon capture: the hopes, challenges and controversies | FT Film ↗Financial Times

Read

• The Climate Casino: Risk, Uncertainty, and Economics for a Warming World ↗A Nobel laureate's accessible yet rigorous exploration of climate change economics, advocating for a global carbon price as the most efficient solution.William Nordhaus
• Net Zero: How We Can Stop Causing Climate Change ↗A pragmatic and incisive analysis of the policy and economic challenges inherent in achieving net-zero emissions, offering a clear roadmap for policymakers.Dieter Helm
• The Stern Review: The Economics of Climate Change ↗A seminal report that fundamentally shifted the economic discourse on climate change, arguing for urgent action to avoid catastrophic future costs.Nicholas Stern
• The Case for a Carbon TaxA concise and compelling argument from a leading economist for the efficiency and effectiveness of carbon taxation as a primary climate policy instrument.N. Gregory Mankiw
• The Social Cost of Carbon: A Critical AssessmentAn essential critique and synthesis of methodologies for calculating the social cost of carbon, highlighting its complexities and the policy implications of its valuation.Richard S. J. Tol

Voices to follow

• Christiana Figueres ↗A principal architect of the Paris Agreement, she offers unparalleled insight into global climate diplomacy and the practicalities of achieving net-zero emissions.Former Executive Secretary, UNFCCC; Co-founder, Global Optimism
• Gernot Wagner ↗His work rigorously dissects the economic levers of climate action, particularly carbon pricing and market mechanisms, providing a clear-eyed view on effective policy.Climate Economist, Columbia Business School; Author
• Myles Allen ↗Instrumental in defining the concept of 'net zero' and quantifying carbon budgets, his scientific rigor underpins much of the global climate mitigation strategy.Professor of Geosystem Science, University of Oxford; IPCC Lead Author
• Ottmar Edenhofer ↗A leading voice on the economic dimensions of climate change, he provides crucial analysis on carbon pricing, energy transitions, and the systemic shifts required for decarbonisation.Director, Potsdam Institute for Climate Impact Research; Professor of the Economics of Climate Change, TU Berlin

Glossary

• Carbon Dioxide (CO2)This is the most common type of greenhouse gas that humans release, mainly from burning fossil fuels like coal, oil, and natural gas. It's a natural part of Earth's atmosphere, but too much of it causes the planet to warm up. For example, the exhaust coming out of a car's tailpipe contains a lot of carbon dioxide.
• Carbon FootprintYour carbon footprint is the total amount of greenhouse gases, especially carbon dioxide, that you or an organization release directly or indirectly into the atmosphere. It's like a measure of your impact on the environment. For example, the electricity you use at home, the food you eat, and how you travel all contribute to your personal carbon footprint.
• Carbon MarketA carbon market is a system where companies or countries can buy and sell permits to emit greenhouse gases, or buy carbon offsets. It creates a financial incentive for them to reduce their emissions. For example, a factory that has reduced its emissions below its limit can sell its extra "emission allowances" to another factory that is struggling to meet its own limit.
• Carbon OffsetA carbon offset is a way to compensate for your own greenhouse gas emissions by funding projects that reduce emissions elsewhere. It's like paying someone else to clean up a mess you made. For example, if an airline wants to reduce its carbon footprint, it might buy carbon offsets to help fund a project that plants trees or builds a wind farm.
• Carbon SequestrationCarbon sequestration is the process of capturing and storing carbon dioxide from the atmosphere, preventing it from contributing to climate change. Nature does this naturally, and humans are also developing technologies to help. For example, planting new forests helps with carbon sequestration because trees absorb carbon dioxide as they grow.
• Climate ChangeClimate change refers to long-term shifts in temperatures and weather patterns around the world, mostly caused by human activities releasing too many greenhouse gases. These changes can lead to more extreme weather events like heatwaves or heavy rains. For example, if your region starts experiencing much hotter summers or more frequent floods than it used to, that's a sign of climate change.
• DecarbonizationDecarbonization is the process of reducing or completely removing carbon dioxide emissions from energy production, industry, and transportation. It's about switching to cleaner ways of doing things that don't release greenhouse gases. For example, replacing coal power plants with solar farms or electric vehicles is a big part of decarbonization.
• EmissionsEmissions are the gases, especially greenhouse gases, that are released into the air, usually as a result of human activities like burning fuel or running factories. These gases contribute to climate change. For example, the smoke coming out of a factory chimney or the fumes from a bus are considered emissions.
• Greenhouse Gases (GHGs)These are gases in Earth's atmosphere that trap heat, like a blanket, keeping our planet warm enough to live. However, too many of them, especially from human activities, can make the Earth too hot. For example, when you burn wood or drive a car, you release greenhouse gases like carbon dioxide into the air.
• Net ZeroNet Zero means balancing the amount of greenhouse gases released into the atmosphere with the amount removed, so that the total amount added is zero. It's like having a bank account where you deposit as much as you withdraw. For example, a country aiming for Net Zero might reduce its emissions from factories and cars, and also plant new forests to absorb the remaining gases.
• Renewable EnergyRenewable energy is power that comes from natural sources that replenish themselves constantly, meaning they don't run out. These sources produce little to no greenhouse gas emissions. For example, electricity generated from sunlight (solar panels), wind (wind turbines), or flowing water (hydroelectric dams) are all forms of renewable energy.

Threads 5

Where this connects to other fields, and why it's worth knowing.

• Behavioral Economics Economics

  Putting a price on pollution should make people pollute less. But in your head it can backfire: once you've paid to 'offset' a flight, you feel you've earned the right to consume more. So the clever fix can actually push emissions up.

• Religion and Morality Religion

  Some companies pay for 'carbon offsets' so they can keep polluting and still feel clean. Centuries ago, people paid the church a fee to keep sinning and feel forgiven. Same deal: pay a price, feel absolved, change nothing.

• Causal Inference & Experiments Mathematics

  When you pay to protect a forest as a 'carbon offset,' it only counts if those trees really would have been chopped down otherwise. So you're buying a what-if that never happened. And proving a what-if is the hardest thing in all of statistics.

• Satellite Imagery and Remote Sensing Geography

  Companies buy 'permits' to pollute and swear they've cut their emissions, but how do you catch one lying? Satellites can now photograph invisible methane leaking from a single site from space. So making a pollution market actually work turns out to depend on being able to measure cheating from orbit.

• Private Law: Contract, Tort & Property Law

  Cap-and-trade invents a brand-new thing to own: the right to release a ton of pollution into the sky. Then it hands those rights out and lets people buy and sell them. In a way, it fences off a piece of the shared air we all breathe and turns it into private property, all disguised as a clever market fix.