How much of a firm’s value to society is hidden by traditional financial metrics? In this interview, Professors Robert Stambaugh and Luke Taylor dive into their study, “Carbon Burden,” which is part of the Jacobs Levy Center’s working paper series.
What surprised you the most about your findings?
Luke Taylor: We already knew that climate change is a big problem, but we were still shocked by how large our estimates of the carbon burden are. I didn’t expect firms’ negative value to society through their carbon emissions to be on the same order of magnitude as firms’ financial value to their shareholders. But that’s what we find. It’s another way of seeing how big a problem climate change is.
What would you like to see explored in future research in this area?
Robert Stambaugh: At the risk of sounding self-serving, we’d like to see continued research into the underlying ingredients of our measure. For example, two of those ingredients are, first, a forecast of carbon emissions in each future year, and, second, a forecast of how much future climate damage will be done per unit of emissions in a given future year. We very much stand on the shoulders of others, taking those forecasts from research overseen by various U.S. government agencies as well as a prominent financial firm. We hope such research will continue its progress and be joined by others.
Luke Taylor: Clearly, it would be good for society to reduce the carbon burden. We need continued research about which policies can reduce that burden fairly and efficiently.
