Summary of Insurance Companies Should Collect a Carbon Levy

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Insurance Companies Should Collect a Carbon Levy summary

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As severe storms rage due to climate change, someone must pay for the damages. Today, that someone is often an insurance company, which then passes the costs down to you: the consumer. University of Oxford statistician Anthony J. Webster and carbon pricing expert Richard H. Clarke make a convincing case that insurers should collect a levy from energy producers. Webster and Clarke discuss the characteristics that make insurance companies the perfect candidates to provide companies with an incentive to reduce their carbon emissions. They explain how their innovative solution might look in practice. getAbstract recommends this article to environmental scientists, policymakers, and economists focused on potential answers to the problem of climate change.

In this summary, you will learn

  • Why insurance companies are ideally situated to address climate change,
  • How the climate and the economy would benefit from insurers collecting an energy levy, and
  • How the implementation of a business-based levy on carbon producers might work.
 

About the Authors

Anthony J. Webster is a statistician at the University of Oxford, UK, in the Nuffield Department of Population Health.  Richard H. Clarke is the director of research at Predict Ability, a carbon-pricing company in Farnborough, UK.

 

Summary

How can insurance companies cope with the rising costs caused by climate change-related severe weather?

Hurricane Harvey is one in a series of storms that caused billions of dollars of damage in 2017. As Earth’s climate changes, predictions suggest that each 1°C (1.8°F) increase in global temperature will result in $1 trillion worth of additional damage yearly. Insurers have increased premiums and declined coverage to cope with these costs. To offset these expenses and move toward a low-carbon economy, insurance companies should impose a levy on energy producers proportional to how much carbon they use. Insurers also face liability from increasing climate change litigation worldwide and from extensive damage caused by climate-related natural disasters. Levy collection could grow over time relative to emission increases and to the monetary damages caused by climate change. Governments would have a role in bringing public policy to bear.

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