Should Fuel Prices Reflect Their True Costs?

Is it worth paying more for gas and coal now to spur emissions reductions in the future? Definitely, according to Bob Litterman, a partner and chairman of the risk committee at Kepos Capital. He spoke to students at Yale SOM on April 22, in the inaugural Colloquium on Asset Management, hosted by the International Center for Finance.

We don’t do something just because it is going to grow the economy in the short run. We think about the consequences and we weigh them. So with emissions, it’s the damages in the future versus the consumption today. Yes, it will cost us some consumption today, but that’s an insurance premium to avoid the damages down the road.