Climate change is a complex problem for which there is no simple solution. “However, economic science can help to bring a better understanding of the problem and of the possible solutions”, says Prof. Dr. Mark Sanders, professor of International Economics at Maastricht University. In the session Climate Change and Energy Policies, part of the module International Business Environment, he advocates that the energy transition is achievable.

Prof. Dr. Mark Sanders is professor of International Economics at Maastricht University since September 2020. His research focuses on innovation economics, entrepreneurship and economic development, with a special emphasis on the role of entrepreneurial activity and finance in the introduction of renewable energy technologies. In 2011 he joined the Sustainable Finance Lab, a multidisciplinary group of Dutch scientists, policy makers and bankers, that develops practical ideas for making the financial sector more sustainable. The Sustainable Finance Lab also raises funds to help the economy make the transition to a more sustainable world.

Unique challenge

Scientific evidence is overwhelming; climate change presents very serious risks and demands urgent global response. “It presents a unique challenge for economics as well”, Mark Sanders argues. “If we want to limit the consequences of climate change, we will have commit to a more sustainable world. A sustainable low-carbon economy is an essential part of that.”

Economics of Climate Change

To offer students a better picture of the problem of climate change Sanders addresses classic environmental economics and a variety of environmental policies and scientific reviews. Among other things, the Stern Review on the Economics of Climate Change is discussed, one of the largest and most widely known reports of its kind. Stern states that climate change is the greatest and widest-ranging market failure ever seen, presenting a unique challenge for economics. Also, the Social Cost-Benefit Analysis is presented. This analysis quantifies and values the policy effects for the whole society; It defines the costs of no action, the benefits of abatement and/or adaptation, the distribution of costs and benefits and weighing those costs and benefits across time and space. Mark Sanders: “Since the solution – energy transition – is mainly an investment challenge – also financing is an important topic in the session. In addition, we review some typical problems of the global energy market. For instance, since energy markets for oil, gas and coal are global the effects of decreasing demand (as a result of the energy transition) do not automatically result in global reduction of production and emissions.”

Energy transition is achievable

Students reflect that Mark Sanders’ session was very up-to-date, especially in the light of recent developments such as the war in Ukraine, the European COVID-19 recovery funds for accelerating energy transition and ambitious governmental climate goals. They considered it hopeful that parties like the ECB, banks, insurance companies and pension funds are slowly but surely moving in the right direction. Main takeaway was Mark Sanders’ positive message that the energy transition is achievable, both from a technological and financial point of view. However, it demands more than ambitious goals and rhetorical treaties. Sanders: “The challenge is to seduce investors with climate projects presenting competing business propositions. Uncontrolled climate change will eventually lead to economic disaster. Strong abatement/adapting to climate change is therefore economically feasible. This justifies a firm transition agenda and a global approach that goes beyond taxing and pricing policies.”

This article displays the insights of the Climate Change and Energy Policies session part of the On-Campus MBA International Business Environment module. Our On-Campus track has an on campus learning format and is part of the executive modular part-time MaastrichtMBA programme. The programme has a Triple Crown accreditation and is aimed for professionals with at least 5 years of working experience.