Inaugural Lectures are designed to celebrate an academic’s career and share their remarkable research areas with a public audience. Last week, a hundred people witnessed Luca Tachini's Inaugural Lecture on the Evolution of Carbon Pricing Policies. Luca is the Business School's Professor and Chair of Climate Change Finance. Yen, an MSc. Human Resource Management student who attended the event, shares her key takeaways.
Head shot of Luca Tachini

As a Human Resource Management student with little knowledge about carbon pricing, I was anxious before the lecture. Due to governmental regulations and international cooperation, companies in several countries are under pressure to take environmental and climate change issues seriously. Carbon pricing, thus, has become an essential training topic for Learning & Development specialists. Fortunately, Luca’s lecture was so intriguing and comprehensive that after just an hour, I could thoroughly understand the subject basics and his spectacular contributions to the field.

After finishing his PhD in Finance, Luca has conducted several interdisciplinary research that cut across the fields of environmental and resources economics, finance economics and industrial organisations. His research has contributed significantly to real-life policies implemented by the UK, the European Commission, and several governments around the globe.

Design carbon markets better

Since the 1980s, carbon pricing policies have experienced a drastic transformation. These policies, initially enforced to regulate emissions in certain areas and reduce local pollutants, set a price to pay when companies’ business activities persistently pollute the environment. When global economic downturns happened, such as the 2008 economic recession, governments were always coerced to change their carbon permit allocations and adjust the cap, thus supporting business growth. Yet, there was no mechanism to assist these bodies in taking such measures. Luca’s work on “Emissions trading systems with cap adjustments” in 2016 proposed and presented a responsive mechanism regulators can use to handle carbon pricing adjustment issues more quickly and effectively. The European Committees have adopted this useful and precise instrument to design their carbon markets better.

Make carbon markets work better

From a local scale, carbon markets have transformed into large-scale efforts, thanks to the global agreement on tackling climate change issues. While some scholars suggested no carbon markets should be linked, Luca’s paper, “Carbon markets: Link with caution”, presented theoretical and empirical evidence to illustrate how carbon market linkage could be potentially useful. Both small and big markets can benefit from such cooperation. As long as policymakers can identify suitable partners, the linkage can help make carbon markets work better. Luca presented some of the findings to the UK Parliament.

Understand carbon markets: Mind the emission gap

Apparently, carbon pricing is a big win for the carbon markets. When the price goes up, the cost of production increases. Thus, to earn competitive edges in the market, companies must identify low-carbon alternatives and cut down on their emissions. Yet, carbon pricing is not always working. While the electricity sector in European countries has significantly reduced their carbon footprint by switching to renewable fuels, emissions from other sectors like the food processing remain almost the same. The investment in new expensive and complicated environmental-friendly manufacturing systems outnumber the price they pay on their carbon emissions.

This means the way regulators set their carbon price may require some further alterations. Luca’s most recent research reveals that the stronger the pressure governments put on companies, the more emissions they would cut down. However, there is no tool available to measure how much pressure is enough to persuade these businesses in adjusting their production ecosystem. Luca’s current research promisingly would address this gap and remove all the obstacles that prevent us from reaching net zero emission goals.

Put a price on carbon

Luca’s future work focuses on two major areas:

  1. Helping countries to put a price on carbon
  2. Evaluating the impacts of climate change on finance

Since Vietnam belongs to a small group of countries that have not implemented or are currently considering any carbon pricing enforcement, I find the first topic fascinating. Luca has worked with the World Bank to develop a handbook on carbon pricing policies. Yet, the guidance remains too general for policymakers to pick the most appropriate approach for their countries. Thus, if he can develop a tool that assists these public servants in making informed decisions, it would be a big breakthrough for carbon pricing regulators and developing countries' authorities.

This Inaugural Lecture has broadened my understanding of carbon pricing policies and Luca’s outstanding contributions to the field. I look forward to Luca’s future work and other Inaugural Lectures from our beloved professors. These fascinating and insightful events empower us Business School students to enrich our knowledge and prepare for future interdisciplinary challenging projects.