Pension fund CEO: Pricing carbon fixes a market failure

This page in:
Philippe Desfossés is the CEO of ERAFP, the French Public Service Additional Pension Scheme. He spoke about carbon pricing from an investor's perspective.

“I support putting a price on carbon because it fixes a market failure. Without carbon pricing, the market has no way to address the costs associated carbon emissions. These costs end up being borne by everyone, including companies and societies.

This is why the IIGCC has been engaging policymakers on a strong and stable price. With a carbon price in place, the market redirects investments. When conventional fuel carries an appropriate price for its emissions, low-carbon and renewable energies are able to compete over time on an increasingly level footing, making it more attractive as an investment. And new energy investment fuels innovation, creates jobs and drives growth.

But to ensure carbon pricing works effectively to reduce emissions and stimulate investment, it must deliver a strong price signal. A weak price without long-term certainty hampers low-carbon investment.

As well as helping deliver investment in low-carbon energy projects, a stable and robust carbon price provides investors with a clearer view of the economic costs and the future risk of holding carbon-intensive assets. A carbon price therefore provides investors with an incentive to pursue other low-carbon activities, such as tilting portfolios away from high-carbon investment.

Carbon pricing is the most cost-effective way of reducing emissions and directing investment away from high-carbon to low-carbon energy projects.

But to be effective, the price must be meaningful. Nevertheless, we can already kick-start the transition, which is the reason why ERAFP has released the carbon footprint of its equities portfolio. It shows that by implementing its best-in-class policy, ERAFP has reduced its carbon intensity by 19 percent compared to its benchmark.

To go one step further, ERAFP is about to decarbonize a $1 billion euro equities portfolio by adding an active carbon filter to its current best-in-class filter.”

Join the Conversation

The content of this field is kept private and will not be shown publicly
Remaining characters: 1000