As has been much remarked in the media, the world’s large banks have, even after the 2015 Paris Agreement, continued to finance fossil fuel projects. The 60 largest banks provided some $3.8 trillion. Many of these banks are our banks here in Europe and, if we don’t approve of what they are doing, then it is our task as citizens to enact appropriate regulations and/or incentives.

An efficient way to do this is to put a price on greenhouse gas (GHG) emissions. This can be done by imposing a tax on GHG emissions, or else by imposing an overall emissions ceiling and then letting some auction process determine the price of emissions permits.[1] Once this is done – and the EU’s Emissions Trading Scheme (ETS) does implement a version of the latter option – then the harmful effects of emissions are “priced in” and only the more valuable fossil-fuel projects remain financially viable and competitive. Assuming the GHG emissions tax or ceiling has been set at an appropriate level, banks need not feel bad about financing any of those remaining high-value fossil-fuel projects.

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