Climate change and fiscal sustainability: Risks and opportunities

Matthew Agarwala, Matt Burke, Patrycja Klusak, Kamiar Mohaddes, Ulrich Volz and Dimitri Zenghelis

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: 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.

Keywords: Sovereign debt; climate change; net zero; transition risk; productivity (search for similar items in EconPapers)
Pages: 22 pages
Date: 2021-09
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... _volz_zenghelis0.pdf (application/pdf)

Related works:
Journal Article: CLIMATE CHANGE AND FISCAL SUSTAINABILITY: RISKS AND OPPORTUNITIES (2021)
Working Paper: Climate Change and Fiscal Sustainability: Risks and Opportunities (2021)
Working Paper: Climate Change and Fiscal Sustainability: Risks and Opportunities (2021)
Working Paper: Climate change and fiscal sustainability: risks and opportunities (2021)
Working Paper: Climate Change and Fiscal Sustainability: Risks and Opportunities (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-80

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().