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Warming with Borders: Forced Climate Migration and Carbon Pricing

Author

Listed:
  • Woongchan Jeon

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

  • Lint Barrage

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

  • Kieran James Walsh

    (KOF Swiss Economic Institute, ETH Zürich, Leonhardstrasse 21, 8092 Zürich, Switzerland)

Abstract

How do financial markets respond to anticipated climate-driven wildfire risk? Using high-resolution meteorological forecasts, land use data, and U.S. municipal bond spreads, we find that municipalities facing greater future wildfire exposure already incur higher borrowing costs: A one standard deviation increase in projected wildfire risk raises primary (secondary) market spreads by 14 (26) basis points - over 40% of the sample mean. Impacts are significantly larger in areas with higher minority populations and greater reliance on local revenue. Our study contributes to the broader literature by introducing a new approach to identifying the financial effects of evolving climate risks.

Suggested Citation

  • Woongchan Jeon & Lint Barrage & Kieran James Walsh, 2025. "Warming with Borders: Forced Climate Migration and Carbon Pricing," CER-ETH Economics working paper series 25/398, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:25-398
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    File URL: https://ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/wp-25-398.pdf
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    More about this item

    Keywords

    Wildfires; Climate Risk; Municipal Bond; Fiscal Costs of Climate Change;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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