TO A NET-ZERO ECONOMY - MAINSTREAMING THE TRANSITION
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MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMY
DISCLAIMER
This report is the product of the Group of Thirty’s Steering Committee
and Working Group on Climate Change and Finance and reflects broad
agreement among its participants. This does not imply agreement with every
specific observation or nuance. Members participated in their personal
capacity, and their participation does not imply the support or agreement of
their respective public or private institutions. The report does not represent
the views of the membership of the Group of Thirty as a whole.
ISBN 1-56708-180-0
Copies of this paper are available for US$25 from:
The Group of Thirty
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Tel.: (202) 331-2472
E-mail: info@group30.org, www.group30.org
MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMY Published by Group of Thirty Washington, D.C. October 2020
WORKING GROUP ON
CLIMATE CHANGE
AND FINANCE
STEERING COMMITTEE
Mark Carney, Co-Chair Gail Kelly
Special Envoy on Climate Action and Finance, Senior Global Advisor, UBS
United Nations Former CEO & Managing Director,
Former Governor, Bank of England Westpac Banking Corporation
Janet Yellen, Co-Chair Hélène Rey
Distinguished Fellow in Residence, Hutchins Lord Bagri Professor of Economics,
Center on Fiscal and Monetary Policy, London Business School
Brookings Institution Former Professor of Economics and International
Former Chair, Board of Governors of the Affairs, Princeton University
Federal Reserve System
Philipp Hildebrand
Vice Chairman, BlackRock
Former Chairman of the Governor Board,
Swiss National Bank
PROJECT DIRECTOR
Caspar Siegert
J.P. Morgan Asset Management
WORKING GROUP MEMBERS
Jacob A. Frenkel William R. Rhodes
Former Chairman, JPMorgan Chase International President and CEO, William R. Rhodes
Former Governor, Bank of Israel Global Advisors
Former Chairman and CEO, Citibank
Maria Ramos
Co-Chair of the Secretary General’s Task Force on Adair Turner
Digital Financing of Sustainable Development Senior Fellow and Former Chairman of the
Goals, United Nations Governing Board, Institute for New
Former Chief Executive Officer, Absa Group Economic Thinking
Former Chairman, Financial Services Authority
GROUP OF THIRT Y iii
Axel A. Weber Ernesto Zedillo
Chairman, UBS Director, Yale Center for the Study of
Former President, Deutsche Bundesbank Globalization, Yale University
Former President, Mexico
John C. Williams
President, Federal Reserve Bank of New York
Former President, Federal Reserve Bank
of San Francisco
EXPERTS
Debarshi Basu
BlackRock
Jennifer Bell
COP26
Carole Crozat
BlackRock
Stuart Mackintosh
Group of Thirty
Sini Matikainen
COP26
iv MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMY
TABLE OF CONTENTS
Foreword........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... vii
Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... viii
Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... ix
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... xi
Introduction.. .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 1
CHAPTER 1. Public Policies.. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 5
CHAPTER 2. The Importance of Predictability and Credibility–Lessons from Central Banking. ..... 13
CHAPTER 3. Strategy and Governance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 21
CHAPTER 4. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 27
CHAPTER 5. Risk Management.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 31
CHAPTER 6. Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 37
Conclusion........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 43
References........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 47
Group of Thirty Members 2020.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 51
Group of Thirty Publications since 2010. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 55
GROUP OF THIRT Y
FOREWORD
T
he Group of Thirty (G30) seeks to deepen essential to both the world’s environmental and eco-
understanding of international economic logical viability as well as economic sustainability.
and financial issues, and to explore the inter- The report makes a series of recommendations which,
national repercussions of decisions taken in the public if implemented, will accelerate the transition to a net
and private sectors. This report, Mainstreaming the zero economy, and boost long-term economic and
Transition to a Net-Zero Economy, continues the financial returns.
G30’s long tradition of evidence-based, actionable On behalf of the G30, we extend our thanks to the
studies. co-chairs, Mark Carney and Janet Yellen, for their
Decisions taken by governments, market regula- able leadership of the Working Group on Climate
tors, financial institutions, and investors, now and Change and Finance, and to the Project Director,
over the medium term alone, will have major impli- Caspar Siegert. We also thank the G30 members who
cations for how livable and sustainable the world will participated in the study as Steering Committee and
be. The report makes clear that these decisions are Working Group members.
Jacob A. Frenkel Tharman Shanmugaratnam
Chairman, Board of Trustees Chairman
Group of Thirty Group of Thirty
GROUP OF THIRT Y vii
ACKNOWLEDGMENTS
O
n behalf of the Group of Thirty (G30), we and firms are embedding net-zero goals within their
would like to express our appreciation to businesses, practices, and cultures.
those whose time, talent, and energy have We extend our thanks to Project Director Caspar
driven this project to a successful completion. We Siegert for his careful drafting and support. We also
would like to thank the members of the Steering thank our team of experts, including Debarshi Basu,
Committee and Working Group on Climate Change Jennifer Bell, Carole Crozat, and Sini Matikainen.
and Finance, who guided our collective work at every The coordination of this project and many aspects
stage. The intellect and experience of this diverse and of project management, Working Group logistics, and
deeply knowledgeable team was essential as we sought report production were centered at the G30 offices
to craft the report’s findings and recommendations on in Washington, D.C. This project could not have
how best to mainstream and accelerate the transition been completed without the efforts of our editor,
to a net-zero economy. Diane Stamm, and the work of Executive Director,
We also must thank the many leaders in the finan- Stuart Mackintosh, and his team, including Desiree
cial community who supported the study and agreed Maruca, Emma Prall, and Peter Bruno. We are grate-
to be interviewed, illuminating how their institutions ful to them all.
Mark Carney Janet Yellen
Co-Chair Co-Chair
Working Group on Climate Change and Finance Working Group on Climate Change and Finance
viii MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMYABBREVIATIONS
BCBS Basel Committee on Banking Supervision
°C degrees Celsius
CCC Committee on Climate Change
CCS Carbon Capture and Storage
CEO chief executive officer
CH4 methane
CO2 carbon dioxide
ESG Environmental, Social and Governance
EU European Union
F-gases fluorinated gases
FSAP Financial Sector Assessment Programs
G30 Group of Thirty
GDP gross domestic product
GHG greenhouse gas
GtCO2eq gigatonnes carbon dioxide equivalent
IAIS International Association of Insurance Supervisors
ICBC Industrial and Commercial Bank of China Limited
IFRS Foundation International Financial Reporting Standards Foundation
IOSCO International Organization of Securities Commissions
IPCC Intergovernmental Panel on Climate Change
N 2O nitrous oxide
NGFS Network of Central Banks and Supervisors for Greening the Financial System
R&D research and development
TCFD Task Force on Climate-related Financial Disclosures
tCO2eq tonnes of carbon dioxide equivalent
GROUP OF THIRT Y ixEXECUTIVE SUMMARY
T
he evidence that climate change is posing Rises in global average temperatures have already
unprecedented risks to our livelihoods is reached 1°C, and could exceed 1.5°C as early as 2030.
overwhelming. Atmospheric concentrations At current rates, we will have exhausted the remaining
of carbon dioxide (CO2) have reached the highest “carbon budget” that is consistent with limiting global
levels in 800,000 years. Over the last three decades, warming to 2°C within the next 25 years. To avert
the number of registered severe weather events has a climate catastrophe, we need to act now and put
tripled. The cost of weather-related insurance losses the world economy on a trajectory toward a net-zero
has increased eightfold over the past decade, to an carbon economy by 2050.
average of US$60 billion; and average uninsured losses Transitioning to a net-zero economy not only
from weather events have increased sevenfold. addresses an existential threat—it also opens up signif-
Still, these effects pale in significance compared to icant opportunities. In the near term, significant green
what might come. If the world continues on its current stimulus packages can help revive economies following
path, temperatures will rise by over 3 degrees Celsius the devastating consequences of Covid-19. Businesses
(°C) above preindustrial levels by 2100, leading to that embrace the transition to net zero also stand to
severe and irreversible physical damage. This includes seize significant long-run returns. The United Nation’s
higher sea levels, food insecurity, more frequent natural Principles for Responsible Investing estimate that util-
disasters, and significant increases in the number of ities that are fully embracing the net-zero economy
dangerous heat days. Overall, world gross domestic could see their market values increase by over 40
product (GDP) could be up to 25 percent lower by percent as investors shift away from lagging to leading
2100 due to these impacts. firms. New generations of electric vehicles demonstrate
Leaving the path toward a climate catastrophe that green alternatives can not only be more environ-
requires us to embrace green technologies across all mentally friendly, but also commercially viable.
sectors of the economy. We will need to reduce carbon This report sets out the steps that governments have
emissions to net zero to limit the increase in global to take to provide the incentives for a transition to
temperatures to well below 2˚C above preindustrial net zero. It also describes how the financial sector can
levels and avoid the most catastrophic consequences accelerate and amplify the effectiveness of public policy
of climate change. by providing capital for sustainable technologies, and
The window for an orderly transition to a net-zero by supporting companies in transitioning from high
economy is finite and closing, so we need to act now. carbon to green, and from green to greener (Box ES.1).
GROUP OF THIRT Y xiBOX ES.1: THE PUBLIC AND PRIVATE SECTORS’ ROLE IN
SHAPING THE TRANSITION TO A NET-ZERO ECONOMY
Credible public policies, transition plans, and dis-
closure of climate-related risks and opportunities
provide the groundwork for transitioning to a net-
zero economy: PUBLIC
POLICY
POLICY
CREDIBILITY
TRANSITION
PLANS
DISCLOSURE
• Public policies will have to shape the incentives for
the transition to net zero.
• Policy credibility will reduce uncertainty around the RISK RETURN
future path of policy.
• Companies will need to draw up transition plans to not be
left behind on the way to net zero.
• Disclosure of these plans allows the financial system to identify ACCELERATING AND
climate leaders and laggards. AMPLIFYING THE
TRANSITION
The financial system must build on this to redirect capital toward more
sustainable technologies and companies. This involves:
• Managing risks around the transition and reflecting these in the prices of
less well-positioned assets.
• Helping companies and investors identify opportunities to generate sustain-
able returns.
This process will help accelerate and amplify the effectiveness of public policy.
Public policy has to shape the incentives for
the transition But more countries need to follow, and they need to
act. As a first step, governments will need to phase out
Public policy has to provide the foundation for a US$480 billion of fossil fuel subsidies. This has to be
transition to net zero. Our climate is a public good. accompanied by a suite of policy tools to ensure that
Private companies and financial institutions will not every household and business internalizes the damage
fully take the impact of their actions on our climate caused by their emissions.
into account unless public policy forces them to do Meaningful carbon prices are a cornerstone of any
so. Leading businesses can accelerate change by antic- effective policy package. By charging an explicit price
ipating future climate policies and adapting to them for the right to emit greenhouse gases, policymakers
today. Ultimately, however, there is no substitute for ensure that green businesses are not put at an unfair
effective, predictable, and credible public policies. advantage relative to their polluting competitors. In
A number of countries have started publishing strat- addition, carbon prices can induce existing high-carbon
egies for how to achieve the goal of net zero. Setting businesses to adjust to net zero in whatever way is most
out these strategies can ensure that as the private and efficient. Carbon prices should increase in a gradual
public sector deploy unprecedented amounts of capital and predictable way to support an orderly adjustment
to rebuild the world economy after Covid-19, they do to a net-zero carbon economy, and they should be
so in a way that is consistent with the transition to designed equitably—for example, by using some of
net zero. the proceeds to support low-income households.
xii MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMYBut the scale of the challenge means that carbon RECOMMENDATION 1
prices alone are not enough. In addition, policymakers Governments must establish comprehensive strategies
will need to align public spending with the goals of for putting their economies on a trajectory to reach-
the Paris Agreement. This includes investments in ing net zero by 2050. The specific steps that countries
low-carbon infrastructure, loans and grants to support take will differ, but an effective policy framework will
green research and development (R&D), and support satisfy a number of common principles:
for developing countries. Significant green stimulus
programs can pay double dividends by supporting the a. Carbon prices that increase in a gradual and
economic recovery from the current pandemic in the predictable way are one key element of any
short run, while also helping avert the catastrophic policy package. Countries, however, will also
consequences of climate change in the long run. In need to provide public funding for low-carbon
addition, targeted environmental regulations can cat- infrastructure and green R&D, and put in place
alyze change in industries that are subject to significant targeted environmental regulation.
collective action problems and that may be less respon-
sive to carbon pricing. b. The benefits that the transition to net zero brings
Countries that move ahead of others are well-po- have to be shared equitably. One way of doing so
sitioned to benefit from the opportunities that the is to use some of the proceeds of carbon pricing
transition to net zero brings. Our climate is a global to support low-income households.
public good, so all countries will need to pursue
similar, ambitious net-zero targets. But we cannot c. To support an efficient global response to climate
wait for this. Countries that move ahead of others are change, the level of ambition of national strategies
likely to benefit economically, and they can avoid any will need to converge over time. In the meantime,
temporary first-mover disadvantages by using “carbon “carbon border adjustments” allow leading coun-
border adjustments.” Any carbon border adjustments tries to pursue more ambitious targets, while
should be subject to a materiality threshold and should avoiding carbon leakage. These adjustments
be limited to the most carbon-intensive products to should be designed in a way that is fully consis-
reduce complexity. They will also need to be designed tent with World Trade Organization rules.
in a way that is fully consistent with World Trade
Organization rules. d. Multilateral and National Development Banks,
Developing countries are not only most impacted Development Finance Institutions, and the
by climate change but also are least able to afford the International Monetary Fund should work on
consequences and they need support to meet the chal- ways of reducing the cost of capital for sustainable
lenge of net zero. Developing countries need support projects in developing countries. This includes
in transitioning to a net-zero economy. Green tech- sharing some of the project risk and collaborat-
nologies are capital intensive, and the cost of capital ing with local governments to develop a pipeline
in developing countries is significantly higher, due, of sustainable projects that helps increase the
in part, to political and regulatory uncertainty as liquidity of these markets.
well as less liquid financial markets. Multilateral
and National Development Banks and Development
Finance Institutions have important roles in reducing Public policy has to be credible: lessons from
the cost of capital, including by sharing some of the central banking
risk of sustainable projects and increasing the liquidity The increasing momentum behind climate movements
of local financial markets. Private investment must around the globe should not be ignored. It demonstrates
and will also play an important role in the transition that in many countries there is already overwhelm-
in developing countries. ing support for ambitious policies to address global
This report makes the following recommendations. warming. An increasing number of politicians have
GROUP OF THIRT Y xiiirecognized this and campaign on ambitious targets Third, governments can accelerate the process
to reduce emissions. By setting out clear strategies, by delegating decisions to independent “Carbon
politicians can provide forward guidance on the pol- Councils.” Determining the goals of climate policy,
icies they plan to put in place. Such predictability of such as the commitment to reach net zero by 2050,
climate policy helps companies start adjusting to the requires democratic accountability and can only be
reality of a net-zero world today, and ensures that this done by elected governments. Governments can,
adjustment is orderly. however, delegate the calibration of the instruments
Too often, however, governments’ climate strate- that are necessary to achieve this target to “Carbon
gies lack credibility. The benefits of climate policies Councils.” Delegating these responsibilities helps insu-
will not be fully visible until long after the next elec- late decisions with significant long-term implications
tions, but any short-term cost will be felt immediately. from short-term political pressures.
Once elected, politicians are hence tempted to skimp
on environmental efforts to fuel short-term growth.
This can make it difficult for businesses to predict RECOMMENDATION 2
the future direction of climate policy. This credibil- Businesses need clarity on future climate policy.
ity problem is similar to the challenge that monetary Governments need to take a number of complementary
policymakers used to face. steps to ensure that climate policy is both predictable
A lack of predictability and credibility means missing and credible.
out on the material benefits of an early, unambiguous
commitment to act. If policymakers make clear that a. For policy to be predictable, the goals of climate
a decisive shift in climate policy is inevitable, finance policy need to be communicated effectively.
will react. The financial system will pull forward future Clear communication and advocacy can help
policies and ensure that the economy starts adjusting businesses plan and can also increase public
to them today. Every year that we win on the path to support for green policies.
net zero can have significant benefits—leading to a
one-off increase in the level of world GDP by 5 percent b. Policy strategies have to command broad polit-
of 2019 world GDP in net present value terms. A cred- ical support to be fully credible. Climate policy
ible commitment to act also avoids the risk of adding is too important to be used to score political
trillions to the stock of stranded assets, and means that points. Instead, responsible politicians will
policymakers will need to intervene less forcefully in work with opposition parties to try to establish
the future. common goals.
First, climate policies need broad political support
to be credible. The experience with inflation targeting c. Countries should cement credibility by building
demonstrates that to address a problem, it needs to a climate policy track record. To do so, gov-
be acknowledged by politicians across the political ernments have to formulate intermediary goals
spectrum. Backtracking on ambitious climate agendas and demonstrate that the steps they are taking
is more difficult if politicians share the same goals and achieve these intermediary goals.
expect to be held to account by both ends of the polit-
ical spectrum. Such a broad-based consensus needs to d. Governments can build credibility more quickly
be supported by clear communication and advocacy. by delegating key decisions to independent
Second, countries should cement credibility by build- Carbon Councils. The success of central bank
ing a climate policy track record. Governments need to independence shows that such delegation is a
formulate intermediary goals that are consistent with powerful way of boosting policy credibility.
their long-term strategies and demonstrate that they
are taking steps to achieve these intermediary goals, for
example, by setting appropriate carbon prices.
xiv MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMYA whole economy transition requires transi- RECOMMENDATION 3
tion plans and climate governance As companies recover from the devastating impact of
The economic fallout from the Covid-19 pandemic Covid-19, they need to rebuild their business models
requires companies to reset their strategies. As compa- in a way that is future-proof and consistent with the
nies recover from the devastating impact of Covid-19, imperative of a net-zero carbon economy. Doing so
they need to rebuild their business models in a way that can help turn an existential risk into various forms of
is future-proof. Developing credible “transition plans” opportunity for dynamic firms and sectors.
that are consistent with the imperative of a net-zero
carbon economy can help turn an existential risk into a. To succeed in the transition, companies need
the opportunity to protect long-term return prospects. clear transition plans. At a minimum, companies
Company boards must review and approve compa- will have to set out targets for their Scope 1, 2,
nies’ transition plans. Boards should ensure the plans and 3 emissions, and set credible milestones.1
are part of regular discussion and deliberations; the
firm’s climate change strategy must form an integral b. Boards must review and approve companies’
part of the organization’s overall strategy. transition plans. A designated board committee
A designated board committee, or the entire board, or the entire board should be tasked with over-
should be tasked with overseeing the execution of the seeing and monitoring the company’s climate
company’s climate transition plan. This ensures that transition plan.
the firm’s transition plan is continuously reviewed and
updated. c. The CEO and senior management team are
The CEO and senior management team are respon- responsible for developing the transition plan
sible for developing the transition plan and leading its and leading its implementation.
implementation. On a day-to-day basis, the CEO and
senior management must be responsible for imple- d. Firms should regularly publish and broadly com-
menting the transition plan, including by ensuring municate progress toward their transition plan.
that all parts of the business internalize the strategy.
Leaders should clearly and consistently com- e. Firms should ensure that performance measure-
municate the company’s climate transition plan to ment and compensation systems explicitly take
employees throughout the company. Setting the “tone account of the organization’s climate change
at the top” matters, but the same messages should also transition objectives.
come from middle management. Business units and
employees throughout the firm should be educated
on and trained on how to apply the climate strategy Transition plans need to be accompanied by
adopted by the firm to their businesses. greater disclosure to help investors identify
Firms should link climate transition goals to exec- leaders and laggards
utives’ compensation. Incentives matter to outcomes. Climate transition plans need to be accompanied by
Shifting incentives to include climate goals will disclosure of high-quality, decision-useful informa-
change how a firm’s employees view the importance tion. Such disclosures allow the financial system to
of these goals. systematically allocate capital toward more sustain-
able technologies and companies.
1 The GHG Protocol Corporate Standard classifies a company’s GHG emissions into three ‘scopes.’ Scope 1 emissions are direct emissions
from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions
are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and
downstream emissions. (Greenhouse Gas Protocol; https://ghgprotocol.org/sites/default/files/standards_supporting/FAQ.pdf).
GROUP OF THIRT Y xvOver the past five years, disclosure of climate- a. All asset managers and creditors should demand
related risks and opportunities has significantly TCFD-consistent disclosure from the companies
increased. This has been achieved through widespread they invest in and lend to.
dissemination of the framework by the Task Force
on Climate-related Financial Disclosures (TCFD), but b. Stock exchanges need to develop common guid-
more remains to be done. ance on climate disclosure that is consistent with
First, more companies need to sign up to the TCFD the TCFD recommendations. Stock exchanges
recommendations. Disclosures remain far from the should work toward making annual climate dis-
scale the markets need to mainstream green finance closures that reflect this guidance a continued
and systematically channel investment to sustainable listing requirement.
and resilient business models. Asset managers and
creditors should demand TCFD-consistent disclo- c. Central banks need to lead by example and
sure from all companies they invest in and lend to. publish fully TCFD-compliant disclosures.
Stock exchanges have to develop guidance for TCFD-
compliant disclosures, and central banks need to lead d. Governments need to set out clear timelines for
by example and publish fully TCFD-compliant disclo- making TCFD-compliant disclosure manda-
sures. There are limits, however, to what decentralized tory by 2023. T his will accelerate disclosure by
private sector action can achieve. Authorities around climate laggards, and further embed TCFD as a
the world also need to set out a timetable for making common international standard.
TCFD-compliant disclosure mandatory by 2023.
Second, disclosures need to become more deci- e. Users of TCFD disclosures should help identify
sion-useful. Enhanced disclosure of common, best practices for clear, comparable, and consis-
quantitative metrics will help investors more system- tent disclosures. International standard-setters
atically identify climate leaders and laggards. These should help turn these best practices into global
metrics are likely to include information on the finan- standards.
cial impact of a range of transition and physical risk
scenarios, as well as information on current Scope
1, 2, and 3 emissions and forward-looking targets. The financial system can accelerate and
Given the complexity in estimating Scope 3 emissions, amplify the effectiveness of public policies…
companies should set out the methodologies they use. The financial system needs to play a decisive role in
The private sector should help identify a consistent accelerating and amplifying the effectiveness of public
and harmonized set of metrics. However, ultimately policies. By factoring a forward-looking assessment of
the process toward greater standardization will need future climate policies into today’s insurance premia,
to be driven by international standard-setters. lending decisions, and asset prices, the financial system
pulls forward the adjustment to a net-zero economy.
By assessing the impact of policies in a systematic way,
RECOMMENDATION 4 it can ensure that climate policies inform the alloca-
Companies across the whole economy need to dis- tion of capital across all sectors of the economy.
close their transition plans and explain how they will Finance is already starting to factor climate-related
realign their businesses with the transition to a net- risks into today’s decisions. Insurance companies are
zero economy. In disclosing these plans, companies at the forefront of considering climate-related risks
should build on existing standards by the Task Force in their risk models. Many of the largest banks have
on Climate-related Financial Disclosures (TCFD). To decided to stop lending to high-carbon industries such
increase the quantity and quality of these disclosures: as thermal coal, and financial markets are starting to
price in the risks associated with transitioning to a
net-zero economy.
xvi MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMY…but to do so, financial institutions need to transition risks is the first step toward pricing them.
more systematically assess climate risks Companies that manage transition risks well will
Financial institutions need to do more to systematically enjoy access to cheaper and more plentiful capital,
assess the impact of various climate scenarios across all while laggards will see their access to finance dry up.
their exposures. Specific operational challenges include This can provide strong incentives for companies to
the fact that financial institutions’ risk models typically take the transition to net zero seriously and to start
consider short time horizons and rely on past data to taking action now.
estimate the severity and frequency of potential tail
risks. Given its unprecedented nature, there is no such
history to draw on in the context of climate change. RECOMMENDATION 5
To effectively manage these risks, financial insti- To manage risks to their business, financial institu-
tutions need to take a strategic, forward-looking tions will need to assess and aggregate the impact of
approach. Static information such as the carbon climate-related risks on their counterparties. They
emissions of companies that financial institutions are also need to move beyond the static to the strategic
lending to, insuring, or investing in is a natural start- and consider how they may be able to react to various
ing point, but it may tell you little about the risks that climate scenarios. To support this by the end of 2022:
a company is facing going forward. Financial insti-
tutions need to also consider companies’ transition a. Financial institutions should run their own sce-
plans, and ask companies to assess how they would nario analysis. This will help explore idiosyncratic
react to changes in the climatic and regulatory envi- climate-related risks that they may be exposed to.
ronment. This will support financial institutions in Using the scenarios designed by the Network of
conducting robust scenario analysis and assessing risk Central Banks and Supervisors for Greening the
to their own balance sheets. Financial System (NGFS) as a starting point will
Central banks and supervisors need to assess the help maintain consistency across firms.
resilience of the financial system as a whole to climate
risks by incorporating them into their stress testing b. Financial institutions should also encourage
frameworks. Financial institutions’ own scenario companies that they lend to, insure, or invest in
analysis is an important step toward measuring to conduct similar scenario analysis, and they
and managing the specific climate-related risks that will need to work with the public sector to iden-
they face, but it is not sufficient. Central banks and tify and address any data gaps.
supervisors will need to extend and adapt existing
stress testing frameworks to capture the full extent c. Central banks and supervisors need to start
of the climate risks. This will ensure comparability of running regular climate stress tests that are
test results, and will allow authorities to assess sys- comparable across firms and allow authorities
tem-wide feedback loops. to assess system-wide feedback loops. These tests
International organizations and standard-setters should consider risks to current balance sheets,
should support this by incorporating climate risk man- as well as the way in which financial institutions
agement into their work programs and frameworks. By may be able to adjust their business model in
using the Network of Central Banks and Supervisors response to various climate-related scenarios.
for Greening the Financial System (NGFS) Reference Central banks and supervisors should seek to
Scenarios, these organizations can also promote har- establish common practices in conducting these
monization of climate stress tests globally. tests, including by using the NGFS Reference
Together, these steps will help accelerate and Scenarios as a starting point.
amplify the transition to net zero. Understanding
GROUP OF THIRT Y xvii…and finance needs to more systematically considerations in every single investment decision. Such
identify and seize the commercial opportuni- metrics should measure how companies and portfo-
ties that the transition to net zero brings lios are performing relative to their peers and to what
Banks are well placed to help their customers seize the is necessary to limit warming to less than 2°C. They
benefits of realigning their businesses with the net-zero also need to capture both current and forward-looking
economy. In many cases, transitioning to a low-car- measures of climate impact. Corporate disclosures are
bon business model requires substantial investments. the building block for these metrics, but the financial
Leading financial institutions are already supporting system needs to put this information into context.
their clients in transition from high carbon to green, While additional metrics will be useful to deepen
and from green to greener—by providing both capital the markets for sustainable finance, this is not a reason
and advice. This helps accelerate a whole economy for investors to drag their feet. The time for investors
transition and provides leading banks with new and to consider climate-related opportunities is now. By
profitable commercial opportunities. moving early, investors can seize the opportunities
Better understanding climate-related risks can that the transition brings before they are fully priced
also open new insurance markets. (Re)insurance in. This will accelerate and amplify the effectiveness
companies have a wealth of experience in modelling of public policy, and will help avert the catastrophic
climate-related risks. By sharing risk models, data, impacts of unmitigated climate change.
and new technologies to improve the understanding
and quantification of natural disaster risks in devel-
oping countries, they can develop new insurance RECOMMENDATION 6
products and address the US$160 billion insurance The financial system can play a key role in unlocking
protection gap that currently exists in developing the commercial opportunities that the transition to
countries. This will help grow the market for climate net zero brings. This will accelerate and amplify the
insurance, bringing significant benefits for insurers effects of policy. To do so:
and policyholders alike.
Similarly, investors can generate significant risk-ad- a. Financial institutions should support their
justed returns by assessing climate-related factors. clients in transitioning to net zero, by offering
As climate regulations become more widespread both capital and advice on how to realign their
and climate events multiply, the integration of cli- businesses with the net-zero economy.
mate-related risks and opportunities in investment
considerations has significantly gained ground. There b. (Re)insurance companies need to share risk
is already evidence that by investing in “greener” models, data, and new technologies to improve
companies, investors stand to reap significant finan- the understanding and quantification of natural
cial rewards. disaster risks in developing countries and open
But to mainstream sustainable finance, the finan- up new insurance markets.
cial system needs to identify the full spectrum of
companies that can support the transition to net zero. c. Banks, insurers, and asset managers should
The number of deep green investment opportunities work with the TCFD to develop forward-looking
is limited. To drive real change and accommodate the metrics capturing the full “fifty shades of green”
growing demand for green investment opportunities, across portfolios and individual companies.
the financial system needs to support all companies
that can help produce goods and services in more car-
bon-efficient ways.
Developing a set of common metrics that capture these
“fifty shades of green” will help embed climate-related
xviii MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMYINTRODUCTION
T
he evidence that climate change is posing unprec- an average of US$60 billion; and average uninsured
edented risks to our livelihoods is overwhelming. losses from weather events, which can often eclipse
Atmospheric concentrations of carbon dioxide insured losses, have increased sevenfold.3
(CO2) have reached the highest levels in 800,000 years Existing challenges pale in significance compared
(Exhibit I.1). Over the last three decades, the number of to what might come. If the world continues on its
registered severe weather events that have led to losses current path, we will see temperatures rise by over 3
has tripled.2 The cost of weather-related insurance degrees Celsius (°C) above preindustrial levels by 2100,
losses has increased eightfold over the past decade, to leading to severe and irreversible physical damage.
EXHIBIT I.1: Atmospheric CO2 concentrations have reached the highest levels in 800,000 years
450
400
350
300
250
200
150
100
50
0
BC
C
BC
BC
BC
BC
C
C
BC
AD
B
B
B
81
81
81
81
81
81
81
81
81
19
7,9
7,9
7,9
7,9
7,9
7,9
7,9
79
,9
20
97
19
89
79
69
59
49
39
29
Source: US National Oceanic and Atmospheric Administration (US NOAA) (2018).
Note: Global average atmospheric concentrations of CO2 measured in parts per million.
2 From Bank of England analysis using Swiss Re and Munich Re loss databases.
3 Using nominal losses, based on 10-year moving average and Swiss Re Institute Data as at year end 2019 in 2019 US dollar terms.
GROUP OF THIRT Y 1These include higher sea levels, food insecurity, more Panel on Climate Change (IPCC) has warned that
frequent natural disasters, and significant increases rises in global average temperatures since preindus-
in the number of dangerous heat days. Overall, world trial times have already reached 1°C and could exceed
GDP may be up to 25 percent lower by 2100 due to 1.5°C as early as 2030. At current rates, we will have
these impacts.4 exhausted the remaining “carbon budget” that is con-
Limiting the increase in global temperatures to sistent with limiting global warming to 2°C within
below 2˚C will significantly reduce this damage. The the next 25 years.6 The picture looks even worse if
impact of temperatures on our ecosystems is highly we account for any growth in emissions by low- and
nonlinear. As a result, we may be able to reduce the middle-income countries (Exhibit I.2).
impact of climate change by up to 80 percent by limit- Hence, governments need to accelerate efforts to
ing the increase in global temperatures to below 2°C.5 address climate change and transition to a net-zero
As part of the Paris Agreement in 2015, governments carbon economy by 2050. Our climate is a global
hence agreed to limit the increase in temperatures to public good. Households and businesses will not fully
well below 2°C, and to pursue efforts to limit the tem- internalize the impact that their individual actions
perature increase even further to 1.5°C. have on the rest of us, and while many green technol-
The window for an orderly transition to a net-zero ogies are starting to compete successfully with their
economy is finite and closing. The Intergovernmental high-carbon alternatives, all too often relying on high
EXHIBIT I.2: Average CO2 emissions per capita in 2018 (in tonnes per year)
50 t
No data 1t 5t 10 t 20 t
Source: Our World In Data (https://ourworldindata.org/), based on Carbon Dioxide Information Analysis Center (CDIAC), Global Carbon
Project, Gapminder, and the United Nations.
4 NGFS 2020.
5 NGFS 2020.
6 https://carbontracker.org/carbon-budgets-where-are-we-now/
2 MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMYcarbon legacy technologies is still in companies’ com- the pandemic, countries had to impose painful restric-
mercial interest. As a result, governments will need tions early on to avoid catastrophic outcomes weeks
to provide the incentives for businesses to take into later. In the context of climate change, leaders need
account the consequences of their actions. to be even more farsighted and take actions decades
The transition to a net-zero carbon economy before the disastrous consequences of inaction would
requires enormous efforts, but the vast majority of become apparent. The Covid-19 pandemic has also
technologies to do so are already available, and their demonstrated that an effective response relies on
cost is falling every day. We need to accelerate invest- strong leadership by the public sector, accompanied
ments in these technologies rather than hoping to by determined private sector action.
make progress by reducing growth. Shutting down This report makes recommendations on how
the world economy for several months to slow the the financial sector can accelerate and amplify the
spread of Covid-19 is expected to reduce annual effectiveness of public policy by redirecting capital
emissions by less than 8 percent, and did not stop toward more sustainable technologies and companies.
the world from continuing to deplete its remaining Businesses and investors who move early to consider
carbon budget. climate-related risks and opportunities can not only
The transition to a net-zero economy not only support the transition to net zero, but also stand to
addresses an existential threat, but also opens up sig- reap significant financial rewards. The report also
nificant opportunities. In the near term, significant sets out recommendations to the public sector. These
green stimulus packages can help revive the economy recommendations focus on the foundations that
following the devastating consequences of Covid-19. policymakers need to put in place to allow the finan-
Businesses that embrace the transition to net zero also cial sector to be a force for good. While the financial
stand to seize significant long-run returns. The United system can accelerate and amplify the effectiveness of
Nation’s Principles for Responsible Investing estimate public policies, it cannot replace them.
that utility companies that are fully embracing the net- Advising on issues at the intersection of public policy
zero economy could see their market values increase by and finance is the key strength of the Group of Thirty.
over 40 percent over the next years. New generations The Group of Thirty consists of economic and finan-
of electric vehicles demonstrate that green alternatives cial leaders from the public sector, academia, and the
can not only be more environmentally friendly, but private sector. Its members have worked on numerous
also commercially viable. global public goods—including by developing inter-
The Covid-19 pandemic has demonstrated the national prudential standards, setting up cross-border
importance of taking action well before the full disas- central bank swap lines, or ensuring robust, fair, and
trous consequences of global warming are felt. During transparent foreign exchange markets.
GROUP OF THIRT Y 3CH A P TER 1.
PUBLIC POLICIES
Our climate is a public good. Hence, we need to put in place effective public policies that
incentivize the private sector to tackle climate change. These policies include carbon prices,
public investment in green infrastructure and R&D, and targeted environmental regulation.
Such policies are the foundation that the financial sector can build on, to accelerate and
amplify the effectiveness of public climate policy.
Effective public policy provides the foundation for economy after Covid-19, they do so in a way that is
addressing climate change. Private companies and consistent with the transition to net zero.
financial institutions will not fully take the impact of But a high-level strategy on its own is not enough.
their actions on our climate into account unless public Governments need to start taking tangible steps that
policy forces them to do so. Leading businesses can are consistent with their longer-term strategies to
accelerate change by anticipating future climate poli- reduce emissions across all sectors of the economy
cies and adapting to them today. Ultimately, however, (Exhibit 1.1). In aggregate, governments’ international
there is no substitute for effective, predictable, and commitments fall significantly short of what is neces-
credible public policies. sary to reach net zero by 2050, and the policies that
Governments need to develop comprehensive they have implemented are not even sufficient to meet
strategies for putting their economies on a trajectory these commitments.8 Governments need to act now,
to reaching net zero by 2050. Over 120 countries, while we have not yet fully depleted our remaining
ranging from Afghanistan to Zambia are actively carbon budget.
discussing the goal of reaching net zero by 2050. As a first step, governments will need to phase out
Countries that have set or are intending to set this the US$480 billion of fossil fuel subsidies that they
goal already account for over half of the world’s GDP.7 provided in 2019 alone. The overwhelming major-
Countries have started publishing strategies for ity of these subsidies are provided by developing
how they plan to achieve this goal. These set out countries. They actively encourage households and
the energy mix that countries aspire to, reductions businesses to waste our remaining carbon budget,
in energy intensity that they plan to achieve, and the and substantially reduce countries’ fiscal room for
role of emerging technologies such as Carbon Capture maneuver. They compare to just US$25 billion of
and Storage (CCS). Setting out these strategies can public money that was spent globally on clean energy
ensure that as the private and public sector deploy R&D over the same period.9
unprecedented amounts of capital to rebuild the world But reducing subsidies will not be enough to align
our economies with net zero. Given the scale of the
7 https://eciu.net/analysis/briefings/net-zero/net-zero-the-scorecard.
8 Climate Action Tracker.
9 OECD 2020; IEA 2020.
GROUP OF THIRT Y 5EXHIBIT 1.1: Share of global CO2 emissions in 2016 by sector at an unfair advantage relative to their
polluting competitors, and they use the
Other Fuel market mechanism to induce existing,
Fugitive Combustion
high-carbon businesses to adjust to net
Emissions Agriculture
zero in whatever way is most efficient,
Building given their individual circumstances.
Land-Use A carbon price helps the private sector
factor environmental considerations into
Waste
all their decisions. An explicit price lends
Industrial itself to inclusion in standard financial
Processes models that are used to assess new
investment opportunities. As such, it is
Electricity/ more likely to be reflected in every single
Heat
Manufacturing/ long-term decision that a business makes
Construction than other, more bespoke policies and
regulations.
Carbon prices should increase in a
Transportation
gradual and predictable way to support
an orderly adjustment to a net-zero
Source: CAIT Climate Data Explorer, World Resources Institute.
carbon economy. A gradual phase-in of
carbon prices allows companies to adjust
challenges, countries have to deploy a suite of policy their business model to increasingly stringent environ-
tools to ensure that households and businesses inter- mental standards, and mitigates any financial stability
nalize the damage caused by their emissions. The risks that could otherwise arise from the transition to
appropriate mix of policy tools will vary across net zero. However, policymakers need to act now to
countries, reflecting structural differences, societal pref- allow for a gradual phase-in while still meeting the
erences, and legal regimes. Any such policy package goal of net-zero emissions by 2050.
can be summed up by the “shadow carbon price” that While an increasing number of countries have
it implies.10 Below we discuss four policy tools that already started pricing GHG emissions, prices will
will need to form the backbone of any policy package. need to increase significantly to limit the rise in tem-
peratures to less than 2°C. About half of the emissions
covered by carbon pricing initiatives are still priced
Meaningful carbon prices will need to form below US$10 per tonnes of carbon dioxide equivalent
the foundation for a transition to net zero… (tCO2e). This compares to a carbon price of US$40 to
Explicit carbon prices help innovative, green com- US$80 necessary to limit warming to less than 2°C.11
panies compete successfully in the market. Carbon Even the prices of some of the largest and most ambi-
prices require businesses to compensate society for tious carbon pricing systems are currently only around
the amount of greenhouse gases (GHGs) they emit. By US$30 (see Exhibit 1.2).12
charging an explicit price for the right to emit GHGs, Many leading companies realize that current
policymakers ensure that green businesses are not put carbon prices are unsustainably low and use higher
10 The Integrated Assessment Models that are used to assess climate policy use “shadow carbon prices” as a proxy for the intensity of various
government policies. The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) estimates that by 2050,
this shadow carbon price would need to reach US$300 for us to have a 66 percent chance of limiting global warming to below 2°C.
11 The High-Level Commission on Carbon Prices, led by Joseph Stiglitz and Lord Nicholas Stern, concluded that a carbon price of US$40 to
US$80 in 2020 is consistent with the objective of the Paris Agreement of keeping temperature rise below 2°. This price would need to rise
to US$50 to US$100 by 2030.
12 Prices and exchange rates as of 31 July 2020.
6 MAINSTREAMING THE TRANSITION TO A NET-ZERO ECONOMYEXHIBIT 1.2: Carbon prices in the European Union versus range estimated to be compatible
with 2° target (in US$ per tCO2e)
$140
$120
$100
$80
Price range consistent with
$60 two degrees target
$40
Co2 price in EU ETS
$20
$0
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: Intercontinental Exchange (ICE); High-Level Commission on Carbon Prices.
Note: ETS = Emissions Trading System.
“internal” carbon prices to evaluate new projects. Carbon pricing should be designed equitably.
This reflects the long economic lifespan of many new Unless designed appropriately, the effects of carbon
investment projects, and a conviction that govern- pricing can hit lower-income households hardest
ment-imposed carbon prices will rise significantly in (Exhibit 1.3). This is because in many countries,
the foreseeable future. While such carbon prices are low-income households spend a larger share of their
far from universal, around 700 large global compa- income on energy or other carbon-intensive products.
nies report using internal carbon prices, with average Governments should address this issue by using some
prices of around US$40.13 of the revenues from carbon prices to support low-in-
Governments must not only increase the level of come households during the transition. By doing so,
carbon prices, but they also need to ensure that these they can decouple the allocative effects of carbon
prices cover all GHG emissions—including nitrous oxide prices from those distributive consequences. In the
(N2O), methane (CH4), or fluorinated gases (F-gases), United States, 68 percent of registered voters now
which have a significantly higher global warming support a “revenue-neutral” carbon pricing scheme
potential than CO2. Together, these gases account for that would disburse any proceeds from a carbon price
around a quarter of GHG emissions.14 Countries need to households.16
to do more to ensure that these prices are applied con- One way of designing carbon pricing schemes in
sistently to all sectors of the economy. For example, the an equitable way is to share some of the proceeds of
European Union’s (EU’s) carbon pricing system cur- carbon prices via “carbon dividends”—lump-sum
rently covers only 45 percent of emissions and excludes transfers to every household in the country. An anal-
sectors such as agriculture that are responsible for over ysis by the US Treasury suggests that in the United
20 percent of GHG emissions globally.15 States, distributing all the revenues from carbon prices
13 CDP 2019.
14 IPCC 2014.
15 https://ec.europa.eu/clima/policies/ets_en; http://cait.wri.org.
16 Leiserowitz et al. 2020.
GROUP OF THIRT Y 7EXHIBIT 1.3: Impact of US$50 carbon price on household consumption (2030)
6.0
Indirect
Electricity
5.0 Coal
Burden, percent of total consumption
Natural gas
Road fuels
4.0
3.0
2.0
1.0
0.0
QUINTILE 5…
QUINTILE 5…
QUINTILE 5…
QUINTILE 5…
QUINTILE 1…
QUINTILE 1…
QUINTILE 1…
QUINTILE 1…
QUINTILE 4
QUINTILE 4
QUINTILE 4
QUINTILE 4
QUINTILE 2
QUINTILE 2
QUINTILE 2
QUINTILE 2
QUINTILE 3
QUINTILE 3
QUINTILE 3
QUINTILE 3
Canada United States China India
Source: IMF 2019.
Note: “Indirect” refers to the increased price of consumer goods from higher energy costs. Burdens are estimated prior to the use of carbon
tax revenue; a full pass-through of taxes to consumer prices is assumed.
to households via such carbon dividends would lead for the distributive effects of carbon prices, only some
to a net increase in after-tax income for the bottom of these revenues are available for cutting public debt.
seven income deciles.17 Some of the proceeds of carbon
prices could also be used to fund low-carbon infra-
structure and green R&D. Depending on the specific …but carbon prices will need to be accompa-
projects, this can accelerate the transition to net zero nied by public investment….
while also helping deliver inclusive growth. In addition to carbon prices, policymakers will need
Alternatively, countries could use some of the pro- to align public spending with the goals of the Paris
ceeds of carbon prices to repair sovereign balance Agreement. This includes investments in low-carbon
sheets following the Covid-19 pandemic. The economic infrastructure, and loans and grants to support green
impact of the pandemic has left many countries’ public R&D. Large parts of the low-carbon infrastructure
finances strained. Revenues from carbon prices could that is necessary to achieve carbon neutrality will be
help address this: a price of US$80 on carbon emissions owned and operated by the public sector. For example,
could raise up to 3 percent of GDP per year. However, state-owned enterprises currently own around 40
given the need to compensate low-income households percent of the power generation capacity in advanced
17 Horowitz et al. 2017.
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