Macro-Financial Transition Risks in the Fight Against Global Warming

21 Pages Posted: 8 Jun 2021 Last revised: 23 Jun 2021

See all articles by Emanuele Campiglio

Emanuele Campiglio

University of Bologna; RFF-CMCC European Institute onEconomy and the Environment; London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

Rick van der Ploeg

University of Oxford - Department of Economics

Date Written: June 1, 2021

Abstract

The macro-financial transition risks that result from disorderly transitions to a carbon-free or low-carbon economy may entail significant costs due to the risk of stranded assets, defaults, collapse in stock market value, both for financial firms and non-financial firms. The effects of networks, contagion, and higher-round effects of stranding may exacerbate the problem. But green monetary and prudential policy and governance reforms may mitigate the problem. The qualitative, empirical, modelling, policy and institutional research on this topic is surveyed and various avenues for future research are identified.

Keywords: low-carbon transition; transition risks; stranded assets; carbon premium; green financial policies; central banks

JEL Classification: E44, Q43, Q58

Suggested Citation

Campiglio, Emanuele and der Ploeg, Rick van, Macro-Financial Transition Risks in the Fight Against Global Warming (June 1, 2021). Available at SSRN: https://ssrn.com/abstract=3862256 or http://dx.doi.org/10.2139/ssrn.3862256

Emanuele Campiglio (Contact Author)

University of Bologna ( email )

Bologna
Italy

RFF-CMCC European Institute onEconomy and the Environment ( email )

Via Bergognone 34
Milan
Italy

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

Rick van Der Ploeg

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

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