Europe has pioneered carbon pricing through the EU ETS—and now through CBAM. But even the best-designed climate policy runs into a hard constraint: trade-offs are real, and public support can evaporate if the costs are hidden or moralized. 

In this episode, I’m joined by Dr. Luis Garicano (LSE professor; former Member of the European Parliament), who argues for a more honest climate policy conversation—one that keeps the strengths of price-based tools like the ETS and CBAM, while being more cautious with mandates and target-driven rule stacks. 

What you’ll learn

• Why “win-win” climate narratives can backfire when households face higher energy prices 
• Carbon pricing vs mandates: where each works, and where mandates can create backlash with limited climate gains 
• How EU institutions and political incentives shape policy design—and make course-correction hard 
• Why “public support” is a core climate policy input, not an afterthought 

Guest
Dr. Luis Garicano is a professor at the London School of Economics and a former Member of the European Parliament (2019–2022), where he worked on major economic policy issues and helped shape early CBAM thinking. 

(If you enjoyed the EU policy arc on this show, this episode pairs naturally with the CBAM episodes and EU ETS history episodes.)

For questions, comments or suggestions, you can contact me at [email protected]

In this episode, I speak with Dr. Alec Brandon of Johns Hopkins Carey Business School about one of the most interesting questions in behavioural economics and climate policy: when do nudges actually persist?

A common example is the home energy report: a letter that tells households how their electricity use compares with that of their neighbours. These reports have been widely used by energy providers and have repeatedly been shown to reduce energy use in the short run.

But there has been a puzzle in the literature. In energy and water conservation, much of the effect seems to remain even after the letters stop. That is very different from other settings—such as voting, charitable giving, or exercise—where nudge effects tend to fade much faster.

Alec Brandon explains the core idea of the paper: persistent effects may come not only from habits, but from technology adoption. If a nudge leads a household to install something more efficient, the savings can remain with the home even after the original resident leaves.

That insight leads to a clever empirical test. Because utilities stop sending the reports when a household moves, the authors can compare what stays with the person and what stays with the property. In their sample, the initial effect is about 2.1%, and roughly 1.1% remains after the original resident moves—suggesting that a substantial share of persistence comes through durable changes to the home. Renters, by contrast, show persistence while they live there, but little that remains once they leave. 

We also discuss:

• why the usual habit-formation story may be too simple
• why renters and homeowners respond differently
• why “persistent” does not mean “costless”
• how behavioural tools can complement pricing and technology policy
• what this implies for climate policy more broadly

This is a really useful episode for thinking more clearly about what nudges do well, where they fall short, and how behavioural policy can be paired with more durable structural change. The transcript frames this as a broader question for climate policy: not just whether a nudge works today, but why it works and whether that mechanism can last.

For questions, comments or suggestions, you can contact me at [email protected]

In Part 2 of my conversation with Richard Tol, we move from model structure to policy use.

We discuss the social cost of carbon, how the Obama-era EPA worked with FUND, DICE, and PAGE, and why Tol thinks the process of understanding a model matters as much as running it. We also talk about why integrated assessment models are often misunderstood, why debates around damage functions get so heated, and what this reveals about the boundary between economics and politics.

The second half of the episode turns to Europe: why cap-and-trade won out over a carbon tax, why cost-benefit analysis is often awkward in real policy settings, and what Tol is working on now at the frontier of climate economics.

This is Part 2 of a two-part conversation.

In this episode:

• why a single social cost of carbon estimate can be misleading
• how the EPA used FUND in practice
• why misunderstood models are dangerous
• damage-function debates and the politics around IAMs
• EU climate policy, cap-and-trade, and cost-benefit analysis
• Tol’s current work on transfers, population, and welfare

These descriptions fit the show’s “paper to policy” framing and your economist/policy audience.

For questions, comments or suggestions, you can contact me at [email protected]

In this episode, I speak with Richard Tol about the origins of the FUND integrated assessment model and why its structure matters for climate economics.

We start with the basic question: what is an integrated assessment model actually for? From there, Richard explains how FUND was built in the early 1990s, why it took a different path from models like DICE and PAGE, and why sector-by-sector damages, public goods, demography, and adaptation all matter if you want to say something useful about climate damages.

A central theme in this conversation is that climate impacts are not just a simple function of temperature. Vulnerability changes with income, public health, infrastructure, and technological change. That has big implications for how economists should think about damages, development, and policy design.

This is Part 1 of a two-part conversation.

In this episode:

• what integrated assessment models do
• how Richard Tol got started building FUND
• why FUND differs from DICE and PAGE
• adaptation, public goods, and sectoral damages
• malaria, heat, and technological change
• how FUND was calibrated from the literature

For questions, comments or suggestions, you can contact me at [email protected]

Voluntary carbon offsets are often discussed on the supply side—quality, additionality, adverse selection. In this episode, we go to the demand side: what do people actually pay for carbon mitigation when it shows up as a real choice at checkout? 

My guest is Matthias Rodemeier (Assistant Professor of Finance, Bocconi University), co-author of the paper “Willingness to Pay for Carbon Mitigation: Field Evidence from the Market for Carbon Offsets.” Using a large-scale field experiment with a German online supermarket, the team randomised the price and impact of a delivery-offset option across ~250,000 consumers. 

We unpack a striking result: consumers are price elastic (lower price → more take-up) but initially impact inelastic(higher CO₂ mitigation → no change in demand). Then we dig into what changes that—learning over repeated exposure and, importantly, firm participation (subsidies vs matching contributions). 

What we cover

• The checkout experiment: what exactly was randomised, and why this design identifies willingness to pay from revealed preferences 
• Price elastic, impact inelastic: why “more mitigation for the same price” doesn’t move demand (at first) 
• Warm glow vs valuation under frictions: how scope insensitivity can be about preferences and comprehension 
• Learning effects: repeated exposure helps consumers map “kg of CO₂” into meaningful comparisons 
• Converting results into the policy unit: ~€13–€16 per ton of CO₂ (with learning and firm participation) 
• Subsidy vs match: why matching can be more cost-effective than simply making offsets cheaper 
• Survey vs real choices: hypothetical willingness to pay can exceed revealed willingness to pay by an order of magnitude 
• Policy implications: voluntary markets as complements, not substitutes, for regulation—and what this implies for greenwashing incentives 

Related episodes: If you want the supply-side backdrop on offsets, see Episode 4 (Ben Probst) and Episode 17 (Beatriz Granziera). 

About the guest
Matthias Rodemeier is Assistant Professor of Finance at Bocconi University. His research sits at the intersection of behavioural economics and public finance, with a focus on environmental policy, taxation, and household finance—often using field experiments with private and public organisations. 

For questions, comments or suggestions, you can contact me at [email protected]

CBAM is simple conceptually, but very hard to put into practice. Turning CBAM into a working system requires something the EU doesn’t naturally have for global supply chains: credible, product-level emissions data, verified across jurisdictions.

In Episode #19, I’m joined by Pauline Miquel, a policy expert who has been tracking CBAM’s fast-moving details and its implications for importers.

We discuss:

• What CBAM covers first (cement, steel, aluminium, hydrogen, electricity, fertilizers—and even some downstream products) 
• Why the end of 2025 brought major last-minute changes—especially around default values that can materially raise expected costs 
• The “ETS logic,” but globally: how third-party verification is supposed to work when emissions are embedded across fragmented supply chains 
• Key uncertainties for importers: timing, predictability of liability, and the shift from quarterly to annual reporting 
• A technical detail that matters: the benchmark (reflecting remaining free allocations under the ETS) and why it can move costs substantially 
• Why CBAM is ultimately a procurement + finance + contracting problem—not just a sustainability reporting line item 

For questions, comments or suggestions, you can contact me at [email protected]

Climate policy faces a built-in incentive problem: countries bear the costs of domestic regulation, while the benefits of lower CO₂ are shared globally. One proposed solution is a Carbon Border Adjustment Mechanism (CBAM) — charging imports a carbon cost comparable to domestic producers (with credits for carbon prices already paid abroad). 

In this episode, I’m joined by Kimberly Clausing to discuss her paper on the global effects of CBAM, with a focus on steel and aluminium — two sectors that are both highly traded and emissions intensive. Using detailed plant-level data, the analysis quantifies impacts on welfare, competitiveness, leakage, and distribution across firms and countries. 

We cover:

• Why CBAM is an answer to the free-rider / leakage / competitiveness triad — and what it can and can’t solve (domestic vs third-market competition). 
• A key empirical surprise: emissions intensity is not tightly correlated with income per capita, which changes how we think about impacts on lower-income countries. 
• “Two types of firms” logic: clean producers may benefit from access to a higher-price market, while dirtier producers may be pushed toward unregulated markets (with price effects abroad). 
• Quantitative results: why welfare effects can be modest in magnitude, why CBAM shifts some burden from producers to consumers, and why CBAM revenue may be smaller than expected due to reallocation. 
• Emissions outcomes: carbon pricing drives substantial reductions; CBAM can add incremental reductions and reduce leakage — especially when only one large jurisdiction acts. 
• The “climate club” logic: how CBAM can make carbon pricing more politically feasible at home and more attractive abroad over time. 

For questions, comments or suggestions, you can contact me at [email protected]

International carbon credits are back in the policy conversation—especially after the EU’s new 2040 proposal reopened the question of whether (and how) Paris Agreement Article 6 credits might play a role.

But “offsets” are a loaded term for a reason: past systems created large volumes of credits, and a recurring critique is that too many didn’t represent real, additional emissions cuts.

So what is Article 6, what’s genuinely different under Paris, and what still isn’t settled?

In Episode #17, I’m joined by Beatriz Granziera (Senior Policy Advisor at The Nature Conservancy), who works on Article 6 negotiations and implementation, including supporting developing countries on domestic Article 6 policy.

We cover:

• What Article 6 is trying to do—and the difference between 6.2 (bilateral/decentralized) and 6.4 (UN-governed centralized mechanism)
• Why Paris differs from Kyoto: every country has an NDC, so accounting rules matter—and how corresponding adjustments aim to prevent double counting
• A market reality check: many agreements, but very little actual trading so far—and why countries may be cautious about selling reductions they might need for their own targets
• The EU angle: why EU demand could reshape standards (and why details matter more than slogans)
• Transitioning old Kyoto/CDM projects into Article 6.4: what “flooding” risks look like in practice and why host-country approval becomes pivotal
• The core tension ahead: quality vs scale—rules can be strong on paper, but too stringent rules can leave a mechanism that can’t generate meaningful supply

Article 6 Explainer by the Nature Conservancy: https://www.nature.org/content/dam/tnc/nature/en/documents/TNC_Article_6_Explainer.pdf

For questions, comments or suggestions, you can contact me at [email protected]

If you think carbon taxes and cap-and-trade are basically the same thing, this episode might change your mind.

For Episode 16, I’m joined by Jeroen van den Bergh (ICREA Research Professor at ICTA-UAB Barcelona) to unpack why carbon markets (ETS / cap-and-trade) may outperform carbon taxes, especially once you take bounded rationality seriously.

We discuss:

• Why the EU ETS scales across borders more easily than taxes
• How cap-and-trade can be politically more resilient (and sometimes “hidden”)
• Why markets can deliver higher carbon prices—and why that matters
• How a cap-and-trade system can self-correct when firms/people under-react to price signals
• What to do with the revenues (rebates, climate projects, innovation—what’s actually smart?)
• The potential progressiveness of Cap-and-Trade or Carbon taxes
• CBAM and Climate Clubs

Paper discussed: Pricing Instruments in Environmental and Climate Policy when Polluters are Boundedly Rational:  https://www.nature.com/articles/s44168-025-00284-9

For questions, comments or suggestions, you can contact me at [email protected]

With the end of the year approaching, it is time to take stock and reflect on the past 14 episodes.

I present lessons and takeaways from each and discuss some upcoming episodes.

For questions, comments or suggestions, you can contact me at [email protected]