How can financial markets help us tackle climate change

Figure SPM.7a Global average surface temperature change

Figure SPM.8a,b Maps of CMIP5 multi-model mean results

Carbon pricing helps align private and social incentives by internalising the

negative externality

Political apetite will vary for different market-based instruments

𝑇𝑝 =𝜆𝑝

1−𝑔∙ 5.35𝑙𝑛 ∙ 1 +

𝐴𝑝𝑄𝑝

𝐶𝐴0+ 𝑅𝑁𝑝

With 𝑔 =5.35𝜆𝑝 𝛾

𝐶𝐴0+𝐴𝑝𝑄𝑝

𝑄 𝑡 = 𝑄 𝑡1 +𝐸𝑚−𝑒𝑟∙(𝑡1−𝑡𝑚)

𝑟+

𝐸𝑚∙ −𝑒𝑚∙ 𝑡𝑚−𝑡 ∙ 𝑚∙ 𝑚+𝑟 ∙ 𝑡−𝑡𝑚 +2 +𝑟 +2𝑚+𝑟

𝑚2

𝐸 𝑡 =

𝑜𝑏𝑠𝑒𝑟𝑣𝑎𝑡𝑖𝑜𝑛𝑠𝐸𝑚 ∙ 𝑒𝑟∙(𝑡−𝑡𝑚)

𝑓 𝑡With 𝑓 𝑡 = 𝐸𝑚 ∙ [1 + 𝑟 + 𝑚 ∙ 𝑡 − 𝑡𝑚 ] ∙

𝑒−𝑚∙(𝑡−𝑡𝑚)

𝑞 𝑖,𝑡 = 𝐸(𝑡) ∙ 𝛼𝑡FS𝑖,𝑡 + (1 − 𝛼𝑡)GS𝑖,𝑡

FS𝑖,𝑡 =𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛𝑖,𝑡

𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛𝑖,𝑡

GS𝑖,𝑡 =𝑞𝑖,2009

𝑞𝑖,2009

𝛼𝑡

✉