The E-axes Forum on Climate Change, Macroeconomics, and Finance

Digests

Our monthly Digests are curated by economists working on climate economics. They are based on the curator’s latest research and highlight the most critical contributions to a specific subject. The Digests aim to illuminate current research and policy debates on mitigating and adapting to climate change from an economic perspective. By distilling complex academic papers into an accessible format, the Digests enable readers to efficiently keep up with this rapidly evolving research area. The series offers a reliable source of current climate economics knowledge to inform analysis and decision making.

Lydia Marsden (UCL) introduces the concept of ecosystem tipping points and discusses challenges in modelling their socio-economic consequences.
Anh H. Le (Goethe University Frankfurt) highlights the need for heterogeneous responses to transition risk, such as macroprudential policies, carbon market permits, green quantitative easing, and green bonds
Florian Heeb (MIT) explores the literature on whether sustainable investing and climate policies interact. He asks a provocative question: could sustainable investing do more harm than good by reducing the likelihood of implementing effective public policies?
Yasmine van der Straten (University of Amsterdam) discusses an interesting finding of her research: investors reward carbon emission intensive companies that make an effort to become more green, as the risk premium is smaller for emission intensive firms that engage in green innovation.
While there is growing evidence of the impacts of regulatory actions and investors on firms’ ESG practices, there is only scant systematic evidence on whether consumers are a possible group of influence. Frank Weikai Li (Singapore Management University) explores recent research which examines whether customers care about firms’ ESG reputation, and in turn, how their reactions impact firms’ financial and ESG performance.
Monica DiLeo (Hertie School) discusses the role of different public institutions in the green transition and examines what kinds of green financial policies are both institutionally and politically feasible.
Luca Taschini (University of Edinburgh Business School, LSE-GRI) shows how central banks can implement optimal mechanisms to adjust the supply of allowances.
In this Digest, Romain Fillon (Université Paris-Saclay, CIRED and PSAE) explains how to incorporate tipping points risks into climate policy modeling.
Historically, central banks and other financial policymakers have played far larger roles in supporting structural economic transformations through the use of credit policies. In this Digest, Katie Kedward (UCL Institute for Innovation and Public Purpose) reflects upon the potential relevance of credit policies to support the green transition.
Ishan Nath (Federal Reserve of San Francisco) highlights the effects of global warming on economic growth and discusses why some related research reaches contradicting conclusions.
Jens van't Klooster (University of Amsterdam) and Eric Monnet (Paris School of Economics and CEPR) look at how tight monetary policy impacts low-carbon investments. Most importantly, they suggest green credit policy instruments, central banks can use, that will enable them to address inflationary pressures without jeopardizing the long-term decarbonization of the economy.
Understanding the linkages between climate vulnerability and sovereign debt risk is pivotal for countries that want to step up their climate mitigation strategies. Bhavya Gupta (National University of Singapore) and Ramkishen S. Rajan (National University of Singapore) have curated the most recent theoretical and empirical literature on the effects of climate on sovereign debt risk.

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