Episode 38: Sam Fankhauser, Director of the Grantham Research Institute on Climate Change and the Environment at LSE, discusses carbon pricing

Sam Fankhauser is Director of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. He has been at the institute since its inception a decade ago, where he initially joined as a Principal Research Fellow. He also holds positions as Deputy Director of the Centre for Climate Change Economics and Policy, Non-Executive Director the CDC Group and a member of the editorial board for the journals Global Environmental Change, Climate Policy and Global Sustainability. Prior to joining the Grantham Institute, Sam served as Deputy Chief Economist at the European Bank for Reconstruction and Development (EBRD). He has also worked at the World Bank, the Global Environment Facility and in the private sector. His research interests include the economics of adaptation to climate change, climate finance and the functioning of carbon markets and climate change policy in the UK.

In this episode, Sam provides an excellent overview of the state of carbon pricing today and outlines its two principal forms; carbon taxation and carbon trading. He discusses the merits and disadvantages of each, stressing that all carbon pricing is ultimately results based. Noting that current carbon prices are far too low to meet the objectives of the Paris agreement, he provides words of cautious optimism looking at successful schemes in Sweden and British Colombia in Canada which show the effectiveness and viability of carbon trading. Sam also discusses significant barriers around issues of political economy and voters’ suspicion of government taxation, and how this renders carbon trading easier to implement practically. He also addresses “shadow pricing” and how the private sector’s growing enthusiasm seems to reflect an understanding that the economic growth of this century will arise from low-carbon opportunities. Finally, he stresses the need for collaboration around carbon pricing to avoid “carbon leakage.” He also points to how empirical evidence suggests that successful schemes can be imported as regulators in different jurisdictions learn from one another.

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