The Safe Carbon Budget - Why the World Economy Will Exceed It

Rick van der Ploeg, professor of economics and research director of the Oxford Centre for Resoure Rich Economies at the University of Oxford. Ph.D. Previously at Cambridge, LSE, Tilburg, Princeton, EUI, Florence and Amsterdam and financial spokesperson and State Secretary for Education, Culture and Sciences.

Climate policy must be directed at keeping peak warming below 2 or 1.5 degrees Celsius. For this purpose I elaborate on risk tolerance, fundamental climate uncertainties and how these affect the point of no return and the safe carbon budget. I also show what carbon prices are needed today and in the future to ensure that the safe carbon budget is not exceeded. I then argue why an effective and credible climate policy is hard to implement due to carbon leakage, Green Paradoxes and political obstacles. If there is a probability that climate policy does become effective, financial markets have to deal with the risk of stranded assets.