Digests

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.

The recent experience with surging inflation, partly driven by supply shocks to the energy sector, has ampiflied concerns over "greenflation," inflationary pressures resulting from the transition to sustainable energy sources. For this digest Conny Olovsson (ECB and Sveriges Riksbank) and David Vestin (Sveriges Riksbank) have curated the most recent literature on the theoretical and empirical findings on how greenflation arises and what central banks can do to curb it. They, and the papers they have chosen, highlight the central role for foresighted monetary policy as well as a smooth carbon taxation path.

Nina Knittel (University of Graz) sheds light on the research investigating how physical damages from one region can spill-over to trading partners.

Matteo Gasparini (Oxford University) creates a map of the main branches of the climate finance literature and classifies it according to different dimensions, shedding light on the emerging strands.

Hugh Miller (OECD) has selected the most recent literature looking at the consequences of a low-carbon global economy for mineral mining.

Derek Lemoine (University of Arizona) introduces a novel market-based instrument that simultaneously measures and controls climate damages.

Patrycja Klusak (Norwich Business School), highlights recent research that aims to adjust sovereign credit scores for the impact of biodiversity risks.

The demand for ‘loss and damage’ finance by vulnerable developing countries is growing. This demand featured heavily at the recent COP27. Danae Kyriakopoulou (LSE Grantham Institute) shares her thoughts on its successes and failures.

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