IDEAS home Printed from https://ideas.repec.org/p/boe/boeewp/0918.html

Climate policy and transition risk in the housing market

Author

Listed:
  • Konstantinos Ferentinos

    (Lancaster University)

  • Alex Gibberd

    (Lancaster University)

  • Benjamin Guin

    (Bank of England)

Abstract

Public policies aimed at mitigating climate change can come with the transition risk of sudden adjustments of asset prices. We study the consequences of a policy intervention addressing greenhouse gas emissions in the housing market. Leveraging a unique data set of the population of all house transactions in England and Wales, we document novel evidence of transition risk. Prices of carbon-intensive properties affected by this policy decreased by about £5,000 to £9,000 relative to unaffected ones. We interpret this result as evidence in favour of semi-strong market efficiency in the housing market. We infer moderate implications for financial stability and for the wealth distribution among homeowners.

Suggested Citation

  • Konstantinos Ferentinos & Alex Gibberd & Benjamin Guin, 2021. "Climate policy and transition risk in the housing market," Bank of England working papers 918, Bank of England.
    • Handle: RePEc:boe:boeewp:0918
    as

    Download full text from publisher

    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2021/climate-policy-and-transition-risk-in-the-housing-market.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Denis Fougère & Nicolas Jacquemet, 2020. "Policy Evaluation Using Causal Inference Methods," Sciences Po Economics Publications (main) hal-03455978, HAL.
    2. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2016. "Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality," American Economic Review, American Economic Association, vol. 106(5), pages 651-655, May.
    3. Simon Freyaldenhoven & Christian Hansen & Jesse M. Shapiro, 2019. "Pre-event Trends in the Panel Event-Study Design," American Economic Review, American Economic Association, vol. 109(9), pages 3307-3338, September.
    4. Philipp Krueger & Zacharias Sautner & Laura T Starks, 2020. "The Importance of Climate Risks for Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1067-1111.
    5. Bolton, Patrick & Kacperczyk, Marcin, 2021. "Do investors care about carbon risk?," Journal of Financial Economics, Elsevier, vol. 142(2), pages 517-549.
    6. Croissant, Yves & Millo, Giovanni, 2008. "Panel Data Econometrics in R: The plm Package," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 27(i02).
    7. repec:diw:diwwpp:dp485 is not listed on IDEAS
    8. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 253-273, September.
    9. Hardy, A. & Glew, D., 2019. "An analysis of errors in the Energy Performance certificate database," Energy Policy, Elsevier, vol. 129(C), pages 1168-1178.
    10. Jenny Crawley & Phillip Biddulph & Paul J. Northrop & Jez Wingfield & Tadj Oreszczyn & Cliff Elwell, 2019. "Quantifying the Measurement Error on England and Wales EPC Ratings," Energies, MDPI, vol. 12(18), pages 1-19, September.
    11. Gunther Maier & Shanaka Herath, 2010. "Efficiency Of The Real Estate Market: A Meta-Analysis," ERES eres2010_114, European Real Estate Society (ERES).
    12. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    13. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
    14. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    15. Ho, Daniel & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2011. "MatchIt: Nonparametric Preprocessing for Parametric Causal Inference," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 42(i08).
    16. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Biasin, Massimo & Delle Foglie, Andrea & Giacomini, Emanuela, 2024. "Addressing climate challenges through ESG-real estate investment strategies: An asset allocation perspective," Finance Research Letters, Elsevier, vol. 63(C).
    2. Bell, Jennifer & Battisti, Giuliana & Guin, Benjamin, 2023. "The greening of lending: Evidence from banks’ pricing of energy efficiency before climate-related regulation," Economics Letters, Elsevier, vol. 230(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferentinos, Konstantinos & Gibberd, Alex & Guin, Benjamin, 2023. "Stranded houses? The price effect of a minimum energy efficiency standard," Energy Economics, Elsevier, vol. 120(C).
    2. Borsuk, Marcin & Eugster, Nicolas & Klein, Paul-Olivier & Kowalewski, Oskar, 2024. "Family firms and carbon emissions," Journal of Corporate Finance, Elsevier, vol. 89(C).
    3. Marcin Borsuk & Nicolas Eugster & Paul-Olivier Klein & Oskar Kowalewski, 2023. "Family Ownership and Carbon Emissions," Working Papers 2023-ACF-01, IESEG School of Management.
    4. Ugolini, Andrea & Reboredo, Juan C. & Ojea-Ferreiro, Javier, 2024. "Is climate transition risk priced into corporate credit risk? Evidence from credit default swaps," Research in International Business and Finance, Elsevier, vol. 70(PB).
    5. Vanessa Ress & Eva‐Maria Wild, 2024. "Comparing methods for estimating causal treatment effects of administrative health data: A plasmode simulation study," Health Economics, John Wiley & Sons, Ltd., vol. 33(12), pages 2757-2777, December.
    6. Bua, Giovanna & Kapp, Daniel & Ramella, Federico & Rognone, Lavinia, 2022. "Transition versus physical climate risk pricing in European financial markets: a text-based approach," Working Paper Series 2677, European Central Bank.
    7. Bardos, Katsiaryna Salavei & Mishra, Dev R. & Somé, Hyacinthe Y., 2025. "Firm-level climate sentiments, climate politics and implied cost of equity capital," Journal of Corporate Finance, Elsevier, vol. 94(C).
    8. Alexander Bassen & Daniel Buchholz & Kerstin Lopatta & Anna R. Rudolf, 2024. "Biodiversity management and stock price crash risk," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4788-4805, July.
    9. Apel, Matthias & Betzer, André & Scherer, Bernd, 2023. "Real-time transition risk," Finance Research Letters, Elsevier, vol. 53(C).
    10. Guesmi, Khaled & Makrychoriti, Panagiota & Pyrgiotakis, Emmanouil G., 2025. "Climate change exposure and green bonds issuance," Journal of International Money and Finance, Elsevier, vol. 152(C).
    11. Awijen, Haithem & Ben Zaied, Younes & Ben Jabeur, Sami, 2025. "Mobilizing FDI in natural resources in the post-COP28 era: Spatial drivers, natural capital, and sustainability dynamics," Resources Policy, Elsevier, vol. 107(C).
    12. Barroso, Raúl & Duan, Tinghua & Guo, Siyue (Sarina) & Kowalewski, Oskar, 2024. "Board gender diversity reform and corporate carbon emissions," Journal of Corporate Finance, Elsevier, vol. 87(C).
    13. Davide Del Prete & Giorgia Giovannetti & Enrico Marvasi, 2017. "Global value chains participation and productivity gains for North African firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(4), pages 675-701, November.
    14. He, Feng & Ren, Xingzi & Wang, Yueren & Lei, Xingfan, 2025. "Climate risk and corporate bond credit spreads," Journal of International Money and Finance, Elsevier, vol. 154(C).
    15. Albanese, Marina & Caporale, Guglielmo Maria & Colella, Ida & Spagnolo, Nicola, 2025. "The effects of physical and transition climate risk on stock markets: Some multi-Country evidence," International Economics, Elsevier, vol. 181(C).
    16. Damian Clarke & Kathya Tapia-Schythe, 2021. "Implementing the panel event study," Stata Journal, StataCorp LLC, vol. 21(4), pages 853-884, December.
    17. Steinbach, Sandro, 2023. "The Russia–Ukraine war and global trade reallocations," Economics Letters, Elsevier, vol. 226(C).
    18. Shinsuke Asakawa, 2020. "Can Child Benefits Shape Parents' Attitudes toward Childrearing in Japan?: Effects of Child Benefit Policy Expansions," Discussion Papers in Economics and Business 19-04-Rev.2, Osaka University, Graduate School of Economics.
    19. Shen, Hongtao & Yang, Qing & Luo, Le & Huang, Nan, 2023. "Market reactions to a cross-border carbon policy: Evidence from listed Chinese companies," The British Accounting Review, Elsevier, vol. 55(1).
    20. Janne Bemelmans & Miet Maertens, 2025. "Implementation and effectiveness of corporate-driven smallholder cocoa certification schemes in Indonesia," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 13(1), pages 1-38, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:0918. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Research (email available below). General contact details of provider: https://edirc.repec.org/data/boegvuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.