“Judge progress at COP27 against the demands of the science”

The demand for ‘loss and damage’ finance by vulnerable developing countries shows that we are faced with ever greater costs from climate change. This demand featured heavily at the recent COP27. For our December digest, Danae Kyriakopoulou (LSE Grantham Institute), who attended the summit in Egypt’s Sharm El Sheikh, shares her thoughts on its successes and failures.

Frontiers of climate and nature in macroeconomics and finance

poppy flowers and other meadow flowers with a view of the sky. Photo by Palle Knudsen.

The macroeconomic challenges from climate and nature change are constantly becoming more prevalent. At a conference hosted by the Banque de France on October 24-25, 2022, early career researchers presented cutting-edge analysis and policy solutions to tackle these challenges. This digests highlights important moments of this conference.

Climate Risks in Financial Markets

Climate change has a destabilizing effect on financial markets. If market actors become overexposed to climate-sensitive assets, the ensuing market failure provides justification for central bank intervention to prevent cascading financial effects.

Making sense of corporate climate disclosures

A field of flowers in purple and yellow. (c) Dan Meyers

Julia Bingler (CEP) has chosen the latest research aiming to improve corporate disclosures on their exposure to transition risks. Climate disclosures, she argues, can be a potent signal to investors only if they are available, understandable and properly processed.

Likely emissions pathways in the 21st century

Frances Moore (UC Davis) has selected recent research that attempts to estimate the likelihood of different greenhouse gas emission pathways. Such estimates must take the socio-political-technical processes that influence emission pathways into account.

The impact of climate change on price stability

To secure price stability and fulfill their primary mandate, policymakers should act promptly: interest rate management, expectation anchoring, financial stabilization, cooperation with fiscal authorities are just some of the tools at their disposal.

Heterogeneous expectations and climate change

Francesca Diluiso (Mercator Research Institute on Global Commons and Climate Change) has selected some recent research on how to incorporate heterogeneous expectations in models that evaluate effects of climate policies on the macroeconomy.

Modelling uncertainty in climate economics

Loïc Berger (Researcher at the CNRS and Professor of Economics at IÉSEG School of Management) highlights research on incorporating uncertainty in analytical models for the purpose of making quantitative assessments of alternative policies.

Distributional impacts of climate change

Stéphane Hallegatte (Senior Climate Change Adviser at the World Bank) has selected his favorite papers on the distributional impacts of physical climate change.