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

Nicholas Z. Muller

“On the Green Interest Rate”

Event description

Nicholas Z. Muller presented findings from his paper “On the Green Interest Rate.” From the abstract:

This paper demonstrates how a central bank might operationalize an expanded role inclusive of managing risks from environmental pollution. The analysis introduces the green interest rate (rg) which depends on temporal changes in the pollution intensity of output. This policy instrument reallocates consumption from periods when output is pollution intensive to when output is cleaner. In economies on a cleaning-up path, rg exceeds r*. For those growing more polluted, rg is less than r*. In the U.S. economy from 1957 to 2016, rg exceeded r* by 50 basis points. Federal environmental policy reversed the orientation between rg and r*.

Moderator:

Pierre Monnin
Senior Fellow, CEP

Nicholas Z. Muller

In July, 2017 Muller joined the Department of Engineering and Public Policy and the Tepper School of Business at Carnegie Mellon University as the Lester and Judith Lave Associate Professor of Economics, Engineering, and Public Policy. Muller is a Research Associate at the National Bureau of Economic Research and a Fellow at the Wilton E. Scott Institute for Energy Innovation. He directs the Tepper School’s Sustainability Initiative. Muller’s research focuses on measuring pollution damage, market-based policy design, green macroeconomic policy design, and firm valuation net of pollution damage. He has served on the USEPA’s Scientific Advisory Board and on a UN Environment Program Panel on Co-Benefits from climate change mitigation.

Paper and slides

"On the Green Interest Rate" (Paper)

"On the Green Interest Rate" (Slides)

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