British economist Nicholas Stern explains why setting a carbon price is key to fighting global warming.
Carbon pricing has become central to this fight. Can you explain why?
It is crucial that markets provide a signal about costs if they are to guide economic action in positive ways, leading to the efficient allocation of resources. This means that the prices of goods, services and activities should reflect their real costs, including the costs they impose on others through the damages that they cause. By ensuring that the prices of fossil fuels reflect their true costs, policymakers help markets to operate more effectively. Carbon pricing is a pro-market action, and those who oppose it are anti-markets. The costs of climate change are potentially very large, and calculations of the social cost of carbon should reflect impacts across the world and on future generations, who could be impoverished by our failure to act.
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