Cameron Hepburn is Battcock Professor of Environmental Economics , the Smith School of Enterprise and the Environment, Oxford University.

Speaking to Srijana Mitra Das, he discusses the economics of climate mitigations: What is the core of your research? I’ve been researching environmental and climate issues for 25 years now, using several interdisciplinary approaches.

As a professor of environmental economics, the latter is a key disciplinary lens I employ, but our major environmental problems cannot be tackled with a single discipline — these are socio-political, technical and scientific challenges and I work with colleagues across these subjects.

Why do you posit switching to renewable energy can actually make people — and economies — richer? Some decades ago, cleaner energies, while delivering all sorts of benefits in terms of human health, air pollution, productivity, jobs and efficiency, were still more expensive than fossil fuels — now, that has changed.

Fossil fuels are commodities and like most commodities, there is no long-term price trend — prices go up and down, often by quite a lot. With commodities, you don’t see the dynamics you find with manufactured goods where, year on year, prices tend to fall due to incremental improvements in technologies, from learning by doing, research, scale economies and improvements in technological ecosystems and other adjacent economies.

Renewable energies fit within this pattern.

So, clean technologies have improved, with large gains in performance to cost ratios.

Those gains are continuing — in most parts of the world, it is now cheaper to build renewable energy plus storage than new fossil fuels.

In some parts, it is cheaper to build new renewable capacity than even run existing fossil capacity — narrowly speaking, you’re better-off scrapping a fossil plant and replacing it with solar plus battery, for instance.

This is ‘narrowly speaking’ because it’s before factoring in all the other benefits from increased productivity since people aren’t suffering from respiratory problems, pollution, etc. This transformation is passing a tipping point now. What role do subsidies for fossil fuels play here? It’s a shame that we have large-scale fossil fuel subsidies in a world hurtling towards a climate catastrophe.

As Antonio Guterres, the UN Secretary-General, has said, we are on a highway to climate hell with our foot on the accelerator.

The fact that we are still subsidising the production and consumption of the very thing driving this disaster beggars belief.

Energy is an incredibly important input into people’s lives, well-being and production processes.

So, world over, governments wish to subsidise it. At the moment though, most of our energy systems are fossil fuelled, so we end up with fossil subsidies — this is a policy driven by good motivations but done in a highly damaging way which must change.

We need a fossil-to-clean switch in the subsidy regime, so people can get the cheapest energy through clean sources now. A subsidy regime which would level the playing field between fossil fuels and renewables would be great — but, given the climate challenge, we should really be offering greater subsidies for clean energy than fossil fuels.

How do you analyse the European Union’s Carbon Border Adjustment Mechanism ( CBAM ) which places tariffs on carbon intensive imports? In 2012, I wrote a paper with my colleagues Dieter Helm and Giovanni Ruta, looking at precisely this kind of idea and the international game theory of it. I’m delighted to see academic ideas like this turning into policy reality.

I understand the concerns companies outside Europe have as the CBAM forces them to internalise climate damage done in their production processes — but, from an economic perspective, this is about levelling the trade regime.

Suppose India put a high price on pollution and increased the costs of its domestic producers, but didn’t place the same costs on importers into India, that would disadvantage local producers and benefit foreign ones.

The CBAM simply levels the playing field by saying, if you wish to sell in the EU, no matter where you produce goods, you need to pay for environmental damage in the production process, just like domestic producers.

In practice, doing this raises many challenges to be overcome but the theory is completely correct.

It’s also leading to useful conversations and important changes in production processes worldwide.

How will this shape climate justice ? This is an incredibly important question — but we can’t deal with questions of justice by distorting the trade regime to favour polluters or failing to internalise environmental damages.

Instead, we need technology transfer , climate finance , aid and other support to developing countries.

I think the CBAM, to the extent that it does result in significant revenue from tariffs, should recycle some of those funds in lump sum forms to help countries clean up their production processes and adapt to climate change.

This must further be seen in the much broader context of historical responsibility — that means particularly the West but now also China, which is increasingly significant.

Only by doing so can we get to a just outcome — failing to price climate change and not halting emissions will deliver justice to no-one. Views expressed are personal