Climate Macroeconomics and Finance

Lecturer: Emanuele Campiglio (emanuele.campiglio@unibo.it)

 

Course structure: 5 lectures of 3 hours each. Lectures 1 and 2 are aimed at both Economics and Frontiers PhD students. Lectures 3 to 5 are only for Economics PhD students.

 

Course outline

 

Lecture 1. Setting the scene

  • Introduction to the course
  • The basics of climate change and decarbonisation
  • Climate-related economic and financial risks
  • Policies for decarbonisation

 

Lecture 2. Climate economics

  • Modelling economy-environment interactions
  • Emissions, climate damages
  • The debate around the social cost of carbon
  • Abatement costs and technical change

 

Lecture 3. The DICE model and its offspring

  • The DICE model structure and functioning
  • DICE and its discontents
  • Integrated assessment modelling, large and small

 

Lecture 4. Macroeconomic climate modelling

  • What is there to model
  • Equilibrium modelling: CGE, DSGE, CAPM
  • Complexity modelling: SFC, ABM

 

Lecture 5 Climate-related macro-financial risks

  • Production and financial networks
  • Asset stranding and Climate Minsky moments
  • Central banks and climate change

 

Selected references:

-          Acemoglu, D., Aghion, P., Bursztyn, L., Hemous, D., 2012. The Environment and Directed Technical Change. American Economic Review 102, 131–166. https://doi.org/10.1257/aer.102.1.131

-          Annicchiarico, B., Carattini, S., Fischer, C., Heutel, G., n.d. Business Cycles and Environmental Policy: A Primer. National Bureau of Economic Research. https://www.nber.org/books-and-chapters/environmental-and-energy-policy-and-economy-volume-3/business-cycles-and-environmental-policy-primer

-          Cahen-Fourot, L., Campiglio, E., Godin, A., Kemp-Benedict, E., Trsek, S., 2021. Capital stranding cascades: the impact of decarbonisation on productive asset utilisation, https://doi.org/10.1016/j.eneco.2021.105581

-          Cai, Y., Lontzek, T.S., 2018. The Social Cost of Carbon with Economic and Climate Risks. Journal of Political Economy 127, 2684–2734. https://doi.org/10.1086/701890

-          Campiglio, E., van der Ploeg, R., 2021. Macro-Financial Transition Risks in the Fight Against Global Warming. https://doi.org/10.2139/ssrn.3862256

-          Dafermos, Y., Nikolaidi, M., Galanis, G., 2018. Climate change, financial stability and monetary policy. Ecological Economics 152, 219–234. https://doi.org/10.1016/j.ecolecon.2018.05.011

-          Golosov, M., Hassler, J., Krusell, P., Tsyvinski, A., 2014. Optimal Taxes on Fossil Fuel in General Equilibrium. Econometrica 82, 41–88. https://doi.org/10.3982/ECTA10217

-          Lamperti, F., Bosetti, V., Roventini, A., Tavoni, M., 2019. The public costs of climate-induced financial instability. Nat. Clim. Chang. 9, 829–833. https://doi.org/10.1038/s41558-019-0607-5

-          Mercure, J.-F., Knobloch, F., Pollitt, H., Paroussos, L., Scrieciu, S.S., Lewney, R., 2019. Modelling innovation and the macroeconomics of low-carbon transitions: theory, perspectives and practical use. Climate Policy 19, 1019–1037. https://doi.org/10.1080/14693062.2019.1617665

-          Nordhaus, W.D., 2017. Revisiting the social cost of carbon. PNAS 114, 1518–1523. https://doi.org/10.1073/pnas.1609244114

-          Semieniuk, G., Campiglio, E., Mercure, J.-F., Volz, U., Edwards, N.R., 2021. Low-carbon transition risks for finance. WIREs Climate Change 12, e678. https://doi.org/10.1002/wcc.678