Climate change and fiscal sustainability: Risks and opportunities

Agarwala, Matthew, Burke, Matt, Klusak, Patrycja, Mohaddes, Kamiar, Volz, Ulrich and Dimitri, Zenghelis (2021) Climate change and fiscal sustainability: Risks and opportunities. National Institute Economic Review, 258. pp. 28-46. ISSN 0027-9501

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Both the physical and transition-related impacts of climate change pose substantial macroeconomic risks. Yet, markets still lack credible estimates of how climate change will affect debt sustainability, sovereign creditworthiness and the public finances of major economies. We present a taxonomy for tracing the physical and transition impacts of climate change through to impacts on sovereign risk. We then apply the taxonomy to the UK’s potential transition to net zero. Meeting internationally agreed climate targets will require an unprecedented structural transformation of the global economy over the next two or three decades. The changing landscape of risks warrants new risk management and hedging strategies to contain climate risk and minimise the impact of asset stranding and asset devaluation. Yet, conditional on action being taken early, the opportunities from managing a net zero transition would substantially outweigh the costs.

Item Type: Article
Additional Information: Funding information: MA, MB and PK acknowledge funding from the INSPIRE Network, MA & DZ acknowledge funding from the Wealth Economy project supported by LetterOne and The Productivity Institute, funded by the UK Economic and Social Research Council (grant number ES/V002740/1).
Uncontrolled Keywords: climate change,net zero,productivity,sovereign debt,transition risk,economics, econometrics and finance(all),sdg 13 - climate action ,/dk/atira/pure/subjectarea/asjc/2000
Faculty \ School: Faculty of Social Sciences > Norwich Business School
University of East Anglia Research Groups/Centres > Theme - ClimateUEA
UEA Research Groups: Faculty of Social Sciences > Research Groups > Finance Group
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
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Depositing User: LivePure Connector
Date Deposited: 28 Sep 2022 09:30
Last Modified: 19 Apr 2023 01:14
DOI: 10.1017/nie.2021.37

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