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Money, Finance and Climate: The Elusive Quest for a Truly Integrated Assessment Model

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  • Etienne Espagne

    (Agence Française de Développement)

Abstract

In this paper, we show how existing IAMs generally omit any representation of a financial sector. We then discuss the potential impacts of climate change policies and climate change events on the financial sector as shown in the existing literature. We underline how the structure of the financial sector itself could impact the carbon trend of the economy. We then see how these specific linkages between the financial and the climate sector can be represented in new types of IAMs, and how they have already started to be addressed, notably in the stock-flow consistent models literature. We conclude on the necessary convergence agenda between climate policies addressing the financial goals in article 2 of the Paris Agreement and financial sector reforms to dampen the intrinsic financial instability.

Suggested Citation

  • Etienne Espagne, 2018. "Money, Finance and Climate: The Elusive Quest for a Truly Integrated Assessment Model," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 131-143, March.
    • Handle: RePEc:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-018-0055-7
    DOI: 10.1057/s41294-018-0055-7
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    Cited by:

    1. Signe Krogstrup & William Oman, 2019. "Macroeconomic and Financial Policies for Climate Change Mitigation: A Review of the Literature," IMF Working Papers 2019/185, International Monetary Fund.
    2. Svartzman, Romain & Dron, Dominique & Espagne, Etienne, 2019. "From ecological macroeconomics to a theory of endogenous money for a finite planet," Ecological Economics, Elsevier, vol. 162(C), pages 108-120.
    3. Louis Daumas, 2021. "Should we fear transition risks - A review of the applied literature," Working Papers 2021.05, FAERE - French Association of Environmental and Resource Economists.
    4. Michele Catalano & Lorenzo Forni & Emilia Pezzolla, 2020. "Fiscal tools to reduce transition costs of climate change mitigation," "Marco Fanno" Working Papers 0265, Dipartimento di Scienze Economiche "Marco Fanno".
    5. Olk, Christopher & Schneider, Colleen & Hickel, Jason, 2023. "How to pay for saving the world: Modern Monetary Theory for a degrowth transition," LSE Research Online Documents on Economics 120343, London School of Economics and Political Science, LSE Library.
    6. Aloui, Donia & Benkraiem, Ramzi & Guesmi, Khaled & Vigne, Samuel, 2023. "The European Central Bank and green finance: How would the green quantitative easing affect the investors' behavior during times of crisis?," International Review of Financial Analysis, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Climate finance; Paris Agreement; IAM; Financial instability; Stock-flow consistent models;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • G1 - Financial Economics - - General Financial Markets

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