Climate Change and Finance

Notice: In order to attend the course it is mandatory to attend also 4 hours of the compulsory course that will be held by Professor Anastasios Xepapadeas. More information are available here

1st part

4 hours for both Economics and Frontiers

1. Macro-financial effects of climate change

Introduction to the course

Economic and financial impacts of climate change

Low-carbon investments for mitigation

2. Macro-financial effects of the low-carbon transition

Risk drivers, transmission channels, second-round effects

Physical and financial asset stranding

3. Policies for a rapid and smooth transition

Carbon pricing

Sustainable finance policy initiatives

Governments, central banks and the institutional framework

References (and references within)

-          Cahen-Fourot, L., Campiglio, E., Dawkins, E., Godin, A., Kemp-Benedict, E., 2019. Capital stranding cascades: The impact of decarbonisation on productive asset utilisation (Working Paper No. 18). WU Institute for Ecological Economics, Vienna.

-          Campiglio, E., 2016. Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy. Ecological Economics 121, 220–230.

-          Campiglio, E., Godin, A., Kemp-Benedict, E., Matikainen, S., 2017. The tightening links between financial systems and the low-carbon transition, in: Arestis, P., Sawyer, M. (Eds.), Economic Policies since the Global Financial Crisis. Palgrave Macmillan, London, pp. 313–356.

-          Campiglio, E., Dafermos, Y., Monnin, P., Ryan-Collins, J., Schotten, G., Tanaka, M., 2018. Climate change challenges for central banks and financial regulators. Nature Climate Change 8, 462–468.

-          Campiglio, E., Monnin, P., von Jagow, A., 2019. Climate risks in financial assets (Discussion Note No. 2019/2). Council on Economic Policies, Zurich.

-          Semieniuk, G., Campiglio, E., Mercure, J.-F., Volz, U., Edwards, N.R., 2020. Low-carbon transition risks for finance. WIREs Climate Change Forthcoming.


2nd part

9 hours only for Economics (+ auditors from Frontiers)

3 lectures of 3h each: Frontal lecture + hands-on exercises + students presentations

4. Climate economics and transition modelling

The origins of the debate

The Limits to Growth and macro-econometric modelling

The neoclassical reaction and the DICE model

Equilibrium vs non-equilibrium modelling

5. Equilibrium modelling

Integrated Assessment Modelling

DSGE modelling of climate/transition

CAPM modelling of climate/transition

6. Non-equilibrium modelling

System dynamics

SFC modelling of climate/transition

ABM modelling of climate/transition


Selected references:

-          Annicchiarico, B., Di Dio, F., 2016. GHG Emissions Control and Monetary Policy. Environ Resource Econ 1–29.

-          Dafermos, Y., Nikolaidi, M., Galanis, G., 2018. Climate Change, Financial Stability and Monetary Policy. Ecological Economics 152, 219–234.

-          Hambel, C., Kraft, H., van der Ploeg, F., 2020. Asset Pricing and Decarbonization: Diversification versus Climate Action (Discussion Paper Series No. 901). Department of Economics, University of Oxford.

-          Karydas, C., Xepapadeas, A., 2019. Pricing climate change risks: CAPM with rare disasters and stochastic probabilities. CER-ETH Working Paper Series Working Paper 19, 311.

-          Lamperti, F., Bosetti, V., Roventini, A., Tavoni, M., 2019. The public costs of climate-induced financial instability. Nat. Clim. Chang. 9, 829–833.

-          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.

-          Rozenberg, J., Vogt-Schilb, A., Hallegatte, S., 2020. Instrument choice and stranded assets in the transition to clean capital. Journal of Environmental Economics and Management 100, 102183.