Markets Are Putting a Price on Climate Risks

Climate specialists have warned for years about a “carbon bubble” in which markets ignore or massively undervalue the risks to companies from climate change. Two new studies suggest, however, that financial markets have started seriously pricing carbon risk, especially since the Paris Agreement of 2015.

Whatever its other effects, that agreement may thus go down in history as the beginning of the end for any carbon bubble. With policymakers meeting in Madrid this week for the U.N.’s annual climate conference, the new research should provide some comfort that their actions will be reflected in financial market prices.