Environment

Wolfram Schlenker, Charles Taylor, 02 May 2019

Understanding beliefs about climate change is important, but most of the measures used in the literature are unreliable. Instead, this column uses prices of financial products whose payouts are tied to future weather outcomes in the US. These market expectations correlate well with climate model outputs between 2002 and 2018 and observed weather data across eight US cities, and show significant warming trends. When money is at stake, agents are accurately anticipating warming trends in line with the scientific consensus of climate models.

Laura Mørch Andersen, Lars Gårn Hansen, Carsten Lynge Jensen, Frank Wolak, 26 April 2019

Increased reliance on solar and wind power has changed the approach to managing peak demand. The column details the results of a Danish experiment designed to flatten demand in which customers were randomly assigned to receive rebates based on how much consumption they could shift between periods of the day. Asking customers to shift consumption to periods of low net demand would create daily cost savings of €100,000 for the utility in question. Paradoxically, demand-shifting reduces the need for installed generation capacity, but increases overall demand.

Dirk Schoenmaker, 17 April 2019

The ECB’s market-neutral approach to monetary policy undermines the general aim of the EU to achieve a low-carbon economy. The column argues that steering the allocation of the Eurosystem’s assets and collateral towards low-carbon sectors would reduce the cost of capital for these sectors relative to high-carbon sectors. A modest titling approach could accelerate a transition to a low-carbon economy, and could be implemented without interfering with the priority of price stability.

Dirk Schoenmaker, 05 April 2019

We're not short of policies intended to save us from catastrophic climate change, but should monetary policy be part of this effort? Dirk Schoenmaker of Erasmus University thinks so, and he tells Tim Phillips how it would work in practice.

Yashaswini Dunga, Nancy Hardie, Stephanie Kelly, Jeremy Lawson, 25 March 2019

As climate change worsens and the forces of populism gather, there is a strong argument for moving beyond narrow economic measures of national progress. This column presents a new indicator of progress that integrates environmental, social, and governance factors into growth analysis. Results show that the countries that have been able to blend economic dynamism with environmental, social, and governance dynamism are mostly developing economies. These countries often fly under the radar of traditional macroeconomic analyses. 

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