Policy Tolls, Green Bonds and Building Close Ties Between Research and Academia

Oct. 20, 2020

Laszlo Sajtos is a PhD graduate from the Stockholm School of Economics. His recent research focuses on corporate and investors’ response to various environmental regulations.

 

The Policy Toolkit to Combat Climate Change

Today, policy makers can choose from various instruments to combat climate change. A key measure in this toolkit is carbon pricing, Mr. Sajtos says. Namely setting an explicit price on carbon dioxide, usually in the form of tax on carbon dioxide emissions or trading emission permits. These policy tools have been used since the 1990s as incentives for abating greenhouse gas emissions and spurring innovation. A more recent development of the policy toolkit are green bonds which have had an exponential uptake since 2011-12.

Green Bonds

A green bond, or climate bond, is a type of instrument that is specifically earmarked to raise money for climate and environmental projects. Academic studies suggest that not only carbon pricing tools but also further public and private investments are fundamental for innovation and reaching abatement targets. Additionally, green bonds are regarded as a potential financing source for these investments, Mr Sajtos adds.

Strengthening a Two-way Dialogue between Academia and Policy Spheres

Next, he highlights the importance of close collaboration between researchers and policymakers on shaping environmental policies. On the one hand, policymakers need to communicate their priorities to scientists to enable relevant and suitable research for practical use. The challenge for researchers is to provide relevant information for policymakers to make informed decisions about climate change and policy response. In order to translate studies into actual policy measures, a two-way dialogue between academic and policy spheres is indispensable form an early stage of the process.