For decades, climate economists and policymakers have favored market-driven solutions with minimal government intervention, advocating carbon pricing as the primary climate policy instrument. The Inflation Reduction Act (IRA), enacted in 2022, represents a fundamental departure from this...

This paper formalizes the geopolitical externality of climate policy and estimates its plausible magnitudes. Specifically, domestic reductions in fossil fuel demand depress global prices, thereby lowering export revenues for resource-rich autocracies - many of which allocate substantial...

We assess how changes in the scientific consensus around equilibrium climate sensitivity (ECS), as captured by the IPCC’s Fifth (AR5) and Sixth (AR6) Assessment Reports, impact policymakers’ willingness to take climate action. Taking the IPCC’s reports at face value, the ECS estimates in...

Despite decades of global attention, effective climate policy implementation remains challenging, with firms and investors often grappling with uncertainty about potential policymaking in addition to actual policy changes. This paper introduces a novel Climate Policy Uncertainty (CPU) index,...

A plethora of sustainable finance taxonomies are emerging worldwide to support shifting trillions for climate action. Employing a qualitative research approach, we use document analysis to assess 26 sustainable finance taxonomy frameworks worldwide that are in the developing phase or have been...

Growing North-South tensions are impeding global climate cooperation and hampering Germany’s search for reliable partners. Brazil is a key actor with the potential to alleviate tensions: it sees itself as a bridge-builder and will host the Climate Change Conference in 2025 (COP30). Under their...

We study the effectiveness of climate change mitigation policies in reducing carbon emissions, focusing on the channel of economy-wide energy efficiency. Using U.S. data, we estimate impulse response functions (IRFs) that characterize how energy efficiency responds to energy price shocks....

Sustainable finance taxonomies such as the European Union (EU) taxonomy can support the transition to a climate-neutral economy. As a classification system, these taxonomies serve to offer transparency and guidance as to how capital flows can be shifted to sustainable and...

Does a shift to ambitious climate policy increase financial fragility? In this paper, we develop a quantitative macroeconomic model with carbon taxes and endogenous financial crises to study such "Climate Minsky Moments". By reducing asset returns, an accelerated transition to net zero exerts...

Industrial policies greening the economy aim to accelerate the transition to net zero. We show that the United States (US) Inflation Reduction Act improved the supply of climate finance globally. Using granular data on global investment funds, we identify a novel international spillover channel...

The 27th Conference of the Parties (COP 27) to the United Nations Framework Conven­tion on Climate Change (UNFCCC) in Sharm el-Sheikh, Egypt, was marked by multiple crises and the shaken confidence of developing countries in the multilateral process. Nonetheless, an agreement was reached on the...

Climate change constitutes one of the major challenges to humankind in the 21st century. To address this crisis, it is necessary to transform the economy and reduce greenhouse gas emissions. The finance industry has the potential to play a central role in this transformation by implementing...

Rising energy prices might lead to adjustments along the supply chain and make firms outsource energy-intensive processes. This could lead to carbon leakage. I provide empirical evidence whether energy price-induced offshoring occurs using firm-level data on energy use, imports, and material...

We construct an overlapping generations model in which the choice between dirty and clean technology hinges on the economy's capital stock, susceptible to climate-induced depreciation. The process of capital accumulation contributes to environmental emissions, yet their intensity can be...

A global monopoly supplier country of necessary inputs for the provision of global public goods has an incentive to subsidize these exports. The strategic interdependence in the global public good context reverses the "large country" incentives to manipulate the terms-of-trade. It is optimal for...

Steelmaking is one of the two largest industrial contributors to climate change, accounting for 7-9% of global CO2 emissions. To achieve drastic emission reduction in the steel sector, integrating breakthrough low-carbon technologies such as carbon capture and storage (CCS) technology and...

This paper explores the potential impacts of climate change and mitigation policies on the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate...

Climate policy in the European Union (EU) and Germany changed significantly with the adoption of net-zero emissions targets. A key new development is the growing importance of carbon management. The umbrella term includes not only the capture and storage of CO2 (carbon capture and storage, CCS),...

Europa: • Deutschland muss sich wieder als wichtiger Teil und als eine der Führungsnationen der EU verstehen. Die neue Bundesregierung sollte in außenwirtschaftlichen Fragen konsequent europäisch denken und handeln. • Nur ein starker EU-Binnenmarkt schafft Augenhöhe mit den USA und...

Europe: • Germany must once again see itself as an important part of and a leading nation within the EU. The new German government should consistently think and act in a European way on foreign trade issues. • Only a strong EU single market can compete on equal terms with the USA and China....

Various stakeholders are increasingly encouraging companies from the real economy to adopt measures facilitating their transition towards carbon neutrality. In this context, companies are expected to implement forward-looking strategies and climate-related reporting practices using scenario...

The Inflation Reduction Act (IRA), passed under the Biden administration in August 2022, is the biggest US climate bill to date. Its focus on subsidy-driven decarbonization incentives marks a potential turning point in US industrial policy and might prevent its repeal under the upcoming Trump...

This paper explores how the low-carbon transition affects firms' credit ratings and market-implied distance-to-default. We develop a novel dataset covering firms' greenhouse gas emissions alongside climate disclosure and forward-looking emission reduction targets. Panel regression analysis...