The economics of climate change and the environment draws on science, human, animal and plant behaviours and valuing non-market goods and services.
How do we go about determining the right decisions to make?
First, we set out a clear economic framework: working out how particular actions determine outcomes such as lower emissions, improve flood defence or better food security.
Second, we employ techniques from game theory and behavioural economics to contingent valuation and real options analysis, to test which relationships are going to be economically important.
Third, we collect the evidence that is needed to apply the chosen technique – assembling data sets, and developing qualitative evidence.
Finally, we advise on the best mechanisms the desired outcomes: markets, standards, regulation, taxes, information provision or others.
This creates the conditions for making better decisions and effective solutions.
Climate targets set the goalposts. We determine how you can score goals.
We all know that reducing greenhouse gas emissions is a global priority. What our clients need is a range of options for how to do it, detail about the associated impacts, costs and benefits and how these differ across sectors, technologies and over time.
On the demand side, the pressing need is for behaviour change in a wide range of areas: choices over types of transport or heating, use of materials, rates of recycling and food consumption decisions.
On the supply-side, we need a range of new technologies to be developed. Some of them are available now, others still need trialling or new research. Almost all of them need to reduce on cost.
Meeting these challenges requires balancing market instruments and market design with the use of new rules, standards, taxes or other more direct interventions. We have complete command over the analytical techniques to examine the technological, behavioural and policy option details.
Governments want to transform Europe’s energy systems, boost manufacturing, invest in new transport, build infrastructure and increase economic growth. The EU wants heavy investment in green energy and upgrading infrastructure.
These conditions are ideal for the development of a low carbon economy. We understand how to put in place the right incentives to reach that destination.
We blend economic principles with innovative thinking, quantitative techniques, financial modelling and sector expertise across energy, transport and industrial production. We paint the “big picture” and set out the detail.
Our clients are:
- Network operators
Moving to a low carbon economy makes the energy system more complex. To enable a cost effective transition, we need to take advantage of technological advances to deliver the change in a smart way.
For our part, being “smart” requires collating information, understanding it and reacting correctly to what it reveals. The rise and rise of “big data” is a dynamic that’s creating huge opportunities and some serious risks.
We have been working on the regulatory and commercial implications of smart grids in the UK and Europe since they were first mooted, both for policy makers and for industry.
Read more about our energy work.
Read more about our technology work.
The climate and energy policy framework is a key driver for the performance of the European economy. We need to get it right, asking questions such as:
- How can we meet multiple targets and objectives?
- How can we balance the costs and benefits?
- What is the impact on the competitiveness of particular firms or industries?
- Are there new opportunities for economic growth?
We work with power companies, regulators, policy makers and consumers worldwide. This provides us with deep-rooted experience in understanding all sides of the issues so that our policy advice is both pragmatic and based on the best evidence.
Some changes to the climate are now inevitable. While we try and lower greenhouse gas emissions, we will also have to adapt to the consequences of climate change. Adapting to our changing climate efficiently will be a significant determinant of our future competitiveness.
We advise governments, businesses and communities on how to adapt. We ask:
- What are the costs and benefits of alternative flood defence measures or measures to protect against drought?
- How should we protect international supply chains from interruption?
- What is the role of markets, insurance and government in adapting to rising sea levels, higher temperatures and storms?
We know what kinds of action are effective and how the benefits measure up to the costs. We also know there can be barriers to action. What are they and how can you overcome them?
Water resources will come under pressure from a growing population, the impacts of climate change and related factors (like urbanisation). Difficult decisions need to be made about the balance of new investment, behaviour change and improved performance of water companies that will allow us to meet future demand.
- Contribute to government policy papers considering ways to create sustainable water trading regimes.
- Advise companies on the impacts of proposed changes.
Read more about our work in water.
Designing and evaluating environmental policies always needs to achieve a balance.
Economics is about using resources efficiently. Our policy designs assess the costs and benefits that a policy or intervention is likely to deliver over its lifetime. We always have an eye on ‘what works’ by looking at policies or interventions already in place to assess their impacts and how those impacts came about. Just as important is working out what might have happened without the policy.
This is why decision makers, from HM Treasury to Defra, BEIS and the UK Environment Agency, find our advice so valuable.
The types of policies we design or evaluate include:
- Regulatory frameworks
- New prices or trading arrangements
- Taxation or subsidy measures
- Voluntary measures and behaviour change.
Please read more about our policy advice.
Fresh economic thinking is essential to reducing the environmental impact of transport – such an essential part of the economy and such a contributor to pollution and climate change.
We help companies, governments and regulators to assess the cost of environmental impacts, examine how environmental policies affect competition, how market-based solutions can reduce the impact of transport on the environment.
We take broad economic principles and combine them with in-depth understanding of regulatory and operational context.
Read more about transport.