Lasse Heje Pedersen Awarded for his Work on 'Carbon Pricing versus Green Finance'

Lasse Heje Pedersen's "Carbon Pricing versus Green Finance" wins Swiss Finance Institute's Outstanding Paper Award for tackling climate change strategies.


Center for Big Data in Finance is delighted to announce that Center Director and Professor Lasse Heje Pedersen has received the Swiss Finance Institute's Outstanding Paper Award 2023. The award recognizes his research paper titled "Carbon Pricing versus Green Finance". The award distinguishes an unpublished research paper expected to make an outstanding contribution to the field of finance.

In his paper, Lasse Heje Pedersen focuses on what is the most appropriate tool to combat climate change. On the one hand, economics recommends various carbon pricing mechanisms such as taxes, allowances, and offsets. On the other hand, green finance has become increasingly popular whether in the form of sustainable finance regulation, ESG investing, or impact investing. In a unified model, which includes both carbon pricing solutions and green finance solutions, Professor Pedersen shows that social optimum is achieved by a common carbon price levied on scope 1 emissions—those directly related to what a company burns—and no green finance interventions. The model further suggests that green finance can be a useful alternative when adequate carbon pricing is not available. Empirical data reveal that wealthier countries not only price carbon at a higher price but also showcase higher ESG investing. Further analysis reveals that carbon pricing is positively linked to democracy and knowledge of global warming, and negatively linked to a country's level of carbon emissions. Overall, Professor Pedersen's findings demonstrate that governments need to fight climate change with the most effective tool—carbon pricing—by ensuring full coverage and pricing that adequately reflects social costs. Otherwise, capital owners, who cannot implement carbon pricing mechanisms, may be attracted to taking the less efficient route of green finance.

Lasse Heje Pedersen will present his research during the SFI Research Days in June 2024.

Find the SFI press release here.

The page was last edited by: Department of Finance // 12/04/2023