Policy Briefs
Are Financial Markets the Last Resort to Save the Environment?
No.
PB 69
Publisher
ERF
Date
December, 2021
Topic
Q3. Nonrenewable Resources and Conservation
G. Financial Economics
In a nutshell
The objective of this brief is to examine how financial markets are affected by climate and energy transition risks. We show that fossil fuels are associated to a higher risk premium on public debt. Moreover, this risk premium increases with a higher level of CO2 emissions per capita. We also show that the quality of institutions plays an important role in counterbalancing the effects of climate-related variables on the risk premium. Finally, we conclude that financial markets could foster energy transition and encourage the implementation of effective environmental policies.
Research Fellows
Mouez Fodha
Professor, University Paris 1 Panthéon-Sorbonne
Authors
Djamel Kirat
University of Orleans
Research Fellows
Chahir Zaki
Chaired Professor of Economics, University of Orléans