2021A1ECOGTHANCA

Climate change is one of the most pressing problems of humanity. Yet the carbon
emissions have not decreased but increased since 2006. The present project
presents a novel approach to achieve a global reduction of carbon emissions in
the coming decades by harnessing the power of financial regulation. We will
concentrate on the challenges to make this approach work, as well as on the
opportunities it presents, to achieve a practical solution for this extremely difficult
problem. We argue that financial stability regulation is sufficiently powerful to
change the incentives for firms and reduce significantly their carbon footprints.
The substance of the argument starts from the observation that financial systems
are increasingly interconnected. This increasing interconnection has led
regulators to give a larger role to a macroprudential approach in their activities.
That is, they intend to reduce risks to the entire financial system, what they call
“systemic risks,” rather than simply risks to individual institutions. The substance
of this project is to answer a series of questions about the viability and desirability
of this policy. It will be structured around three work packages. WP1, will analyse
the expected distribution of shocks that arises from climate change. It will also
study their impact to the financial system. The other two works packages will
explore two key determinants of adoption of the policy. In WP2 we explore the
impact of the large uncertainty about the effects of climate change on the mindset
of regulators. In WP3 we study the transmission of social attitudes and social
norms into the decision processes of legislators and regulators. The data will
arise from survey experiments that will be used to answer the research questions
in WP and from field data in WP3.
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Data used for the paper: "The effect of ambiguity in strategic environments: an experiment" by Pablo Brañas-Garza,
Antonio Cabrales, María Paz Espinosa, Diego Jorrat.
Available at: https://arxiv.org/abs/2209.11079