Demand or Supply? An empirical exploration of the effects of climate change on the macroeconomy

Matteo Ciccarelli and Fulvia Marotta

Energy Economics, 2024, vol. 129, issue C

Abstract: Using an original panel data set for 24 OECD countries over the sample 1990–2019 and a multivariate empirical macroeconomic framework for business cycle analysis, the paper tests the combined macroeconomic effects of climate change, environmental policies and green innovation. Overall, we find evidence of significant macroeconomic effects over the business cycle: physical risks act as negative demand shocks while transition risks act as downward supply movements. The disruptive effects on the economy typical of a disorderly transition are exacerbated for low income, high emission countries with no history of environmental policy or with a high exposure to natural disasters. In general, one size does not fit all and results support the need for a (possibly country-specific) policy mix to counteract climate change with a balance between demand-pull and technology-push policies.

Keywords: Environmental policy; Environment-related technologies; Physical risks; Business cycle; SVAR (search for similar items in EconPapers)
JEL-codes: C11 C33 E32 E58 Q5 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323006618

DOI: 10.1016/j.eneco.2023.107163

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