Warming with Borders: Forced Climate Migration and Carbon Pricing

Woongchan Jeon, Lint Barrage and Kieran James Walsh
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Woongchan Jeon: Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland
Lint Barrage: Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland
Kieran James Walsh: KOF Swiss Economic Institute, ETH Zürich, Leonhardstrasse 21, 8092 Zürich, Switzerland

No 25/398, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: How do financial markets respond to anticipated climate-driven wildfire risk? Using high-resolution meteorological forecasts, land use data, and U.S. municipal bond spreads, we find that municipalities facing greater future wildfire exposure already incur higher borrowing costs: A one standard deviation increase in projected wildfire risk raises primary (secondary) market spreads by 14 (26) basis points - over 40% of the sample mean. Impacts are significantly larger in areas with higher minority populations and greater reliance on local revenue. Our study contributes to the broader literature by introducing a new approach to identifying the financial effects of evolving climate risks.

Keywords: Wildfires; Climate Risk; Municipal Bond; Fiscal Costs of Climate Change (search for similar items in EconPapers)
JEL-codes: G12 H74 Q54 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2025-03
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