Kazunari Kainou, 16 March 2022

The Clean Development Mechanism under the Kyoto Protocol is the world’s first international carbon finance scheme. Companies can acquire tradeable certified emission reduction credits by investing in energy conservation and new energy projects in developing countries. Despite its early success, the scheme collapsed following a ‘carbon panic’ in 2012. This column reviews the collapse of the mechanism and its spillovers on Paris Agreement negotiations. While the scheme was unexpectedly revived thanks to interest from the US and developing countries, carbon financing remains structurally prone to panic.

Winta Beyene, Manthos Delis, Kathrin de Greiff, Steven Ongena, 04 December 2021

One of the concerns in the debate on climate change is whether financial flows contribute to the reduction of emissions. This column looks at the role bond market-based and bank-based debt plays in the allocation of resources to fossil fuel in the context of the risk of stranded assets. The authors show that banks continue to provide financing to fossil fuel firms that the bond market would not finance as long as they do not price the risk of stranded assets. In this setting, stranded assets risks may have shifted to large banks.

Patrick Bolton, 05 October 2021

Do financial markets penalise firms that emit a lot of carbon, and is this an incentive for them to reduce emissions? Patrick Bolton of Columbia Business School has analysed the financial returns to estimate how carbon risk is priced.

Patrick Bolton, Marcin Kacperczyk, 24 March 2021

A company’s carbon-transition risk – associated with curbing carbon emissions within a relatively short period of time – is proportional to the size and growth rate of the company’s carbon emissions. This column asks whether companies with different carbon emissions have different stock returns. The total level of a company’s CO2 emissions and the year-by-year growth in emissions significantly affect its stock returns in most geographic areas of the world. The increasing cost of equity for companies with higher emissions can be a form of carbon pricing by investors seeking compensation for carbon-transition risk.

Itzhak Ben-David, 05 March 2021

Anti-pollution laws penalise firms whose activities emit CO2. Itzhak Ben-David tells Tim Phillips that well-intentioned regulation may be causing multinationals to shunt polluting activities to poorer countries where regulation isn’t so strict.

Jennifer Castle, David Hendry, 04 June 2020

The UK’s 2008 Climate Change Act has led to a 34% fall in CO2 emissions by 2019, while real GDP per capita had risen by more than 10% following the crash into the ‘Great Recession’. Can the UK achieve its recent net-zero emissions target by 2050 while still growing? This column describes some speculative routes to such a decarbonised future.

Johannes Bollen, 13 March 2020

While the energy transition to decarbonise the EU’s economy fully by 2050 will be felt economically in all member states, the costs of decarbonising can be substantially lowered through maximising the production of hydrogen, which in turn can be used to generate electricity. This column uses a global climate-energy economic model to compare three energy production scenarios. It finds that wind energy plus gasification of biomass, natural gas, or coal with carbon capture storage can reduce the cost of achieving Europe’s 95% emissions-reduction goal by 40%. 

David Hendry, 12 December 2018

The Industrial Revolution has been of vast benefit to humanity, but it came at the cost of a global explosion in anthropogenic emissions of greenhouse gases. The UK was the first country into the Industrial Revolution. Now it is one of the first countries heading out, with annual CO2 emissions per capita back below the levels of the 1860s. This column presents an econometric model of UK emissions over the last 150 years to establish what has driven them down and reveal the impacts of important policies, especially the Climate Change Act of 2008. Even so, large reductions in all the UK’s CO2 sources are still required to meet its 2050 target of an 80% reduction from 1970 levels.

Justin Caron, Thibault Fally, 01 December 2018

With global emissions of CO2 still growing, understanding the determinants behind energy use and emissions is as relevant as ever. This column looks at the role of per capita income and consumption choices. It finds that the share of expenditures spent on energy and energy-intensive goods tends to decrease with income across a large set of countries. Simulations indicate that income growth shifts consumption patterns in a way which generally reduces emissions. However, increasing emissions in low- and middle-income countries as well as a shift from direct to indirect consumption of energy mean that the effect on total world emissions is modest.

Scott Barrett , Carlo Carraro, Jaime de Melo, 10 November 2015

This year, for the first time ever, nearly all of the world’s countries are making pledges to help limit future climate change. As of 1 October, 147 countries (representing about 85% of global emissions) have submitted their Intended Nationally Determined Contributions. These pledges, if carried out in full, are expected to lower emissions relative to the ‘business as usual’ forecast. However, they are not expected to prevent emissions from increasing above today’s level through 2030. To meet the global goal of limiting mean global temperature change to 2°C relative to the pre-industrial level, much more will need to be done after 2030. Eventually, emissions will have to fall to zero worldwide – either that, or countries will need to remove carbon dioxide directly from the atmosphere. This column introduces a new Vox eBook that looks into what needs to be done to build a climate regime that is both workable and effective.

Brian Flannery, Jaime de Melo, 28 September 2015

Climate monitoring organisations report that 2015 is set to break global temperature records. Meanwhile, this December ministers will convene at the UN meeting in Paris and the WTO meeting in Nairobi to continue climate negotiations. This column reports on progress to date, arguing that small steps forward are being taken, but they are not sufficient.

John Hassler, 11 March 2012

The concern over the negative consequences of global warming has led to a vast array of policy measures aimed at reducing the use of fossil fuels. Yet a comprehensive plan for a shift towards more climate-friendly energy is still lacking. This column argues that a major reason for this is that macroeconomists have not been sufficiently active in the policy discussion. It then lays out four lessons from macroeconomics that should be helpful.

Hans Gersbach, 11 February 2008

Tackling climate change is difficult because it requires international cooperation to address global externalities. This column proposes a global refunding system, which would provide incentives for emissions reductions while allowing member countries to choose their carbon tax rates.

Carlo Carraro, Valentina Bosetti, Emanuele Massetti, Massimo Tavoni, 24 January 2008

If the world wants to stabilise atmospheric greenhouse gases at 550 parts per million, massive changes are required, especially in the energy sector. This article discusses means and costs of drastically reducing carbon emissions.

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