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

Michael Barnett

“Climate Change Uncertainty Spillover in the Macroeconomy”

Event description

This is the first of four webinars in our series how (model) uncertainty shapes our understanding of the macroeconomic impacts of climate change and climate mitigation policies. From the abstract:

“The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. We explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. We appeal to decision theory under risk, model ambiguity and misspecification concerns to provide an economically motivated approach to uncertainty quantification. We show how this approach reduces the many facets of uncertainty into a low dimensional characterization that depends on the uncertainty aversion of a decision-maker or fictitious social planner. In our computations, we take inventory of three alternative channels of uncertainty and provide a novel way to assess them. These include i) carbon dynamics that capture how carbon emissions impact atmospheric carbon in future time periods; ii) temperature dynamics that depict how atmospheric carbon alters temperature in future time periods; iii) damage functions that quantify how temperature changes diminish economic opportunities. We appeal to geoscientific modeling to quantify the first two channels. We show how these uncertainty sources interact for a social planner looking to design a prudent approach to the social pricing of carbon emissions.”


You can download the data file here.


Anastasia Pappas
Founder, E-axes Forum

Michael Barnett

Michael Barnett is an Assistant Professor of Finance at the Arizona State University W.P. Carey School of Business. His research revolves around asset pricing, macroeconomics, climate change, and uncertainty. His work has been published in the Review of Financial Studies and the NBER Macroeconomics Annual. Michael holds a PhD in Financial Economics from the University of Chicago.

Paper and slides

Climate Change Uncertainty Spillover in the Macroeconomy (Paper)

Climate Change Uncertainty Spillover in the Macroeconomy (Slides)



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