Using Short-Term Scenarios to Assess the Macroeconomic Impacts of Climate Transition

Thomas Allen, Mathieu Boullot, Stephane Dees, Annabelle De Gaye, Noëmie Lisack, Camille Thubin and Oriane Wegner

Working papers from Banque de France

Abstract: This paper proposes a set of short-term scenarios that reflect the diversity of climate transition shocks -- increase in carbon and energy prices, increase in public or private investment in the low-carbon transition, increase in the cost of capital due to uncertainty, deterioration of confidence, accelerated obsolescence of part of the installed capital, etc. Using a suite-of-model approach, we assess the implications of these scenarios for the dynamics of activity and inflation. By considering multiple scenarios, we therefore account for the uncertainty around future political decisions regarding climate change mitigation. The results show that the magnitude and duration of the macroeconomic effects of the transition to carbon neutrality will depend on the transition strategy chosen. While a number of short-term scenarios being inflationary or even stagflationary, there are also factors that could curb inflation and boost economic growth.

Keywords: Climate Transition; Scenario Analysis; Macroeconomic Modelling (search for similar items in EconPapers)
JEL-codes: C60 E44 E50 G32 Q40 Q54 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2023
New Economics Papers: this item is included in nep-cfn, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:922

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