This paper uses insights from decision theory under uncertainty to explore research challenges in climate economics. We embrace a broad perspective of uncertainty with three components: risk (probabilities assigned by a given model), ambiguity (level of confidence in alternative models), and...

We examine climate transition risk in New Zealand (NZ) equities given that NZ's greenhouse gas (GHG) emissions are dominated by agricultural emissions and that carbon pricing has been in place since 2008. Only around half of NZX50 companies disclose emissions and that disclosure is driven by,...

We investigate carbon risk in global equity prices. We develop a measure of carbon risk using industry standard databases and study return differences between brown and green firms. We observe two opposing effects: Brown firms are associated with higher average returns, while decreases in the...

I exploit a new dataset from Four Twenty Seven and identify physical climate risk factors that can explain the variation in global individual stock returns. North American stocks are currently exposed to an extreme rainfall factor and an overall climate risk factor. European and Japanese stocks...

We examine the existence of physical and transition climate risk premia in euro area equity markets. To do so, we develop two novel physical and transition risk indicators, based on text analysis, which are then used to gauge the presence of climate risk premia. Results suggest that climate risk...

This research provides new perspectives on carbon risk factor by using raw carbon data; cleaning carbon data; analyzing global stock universe; utilizing a long data timeframe; and constructing three unique carbon factors. All three carbon factors (carbon volume, carbon financial efficiency, and...

The social rate of discount is a crucial driver of the social cost of carbon (SCC), i.e. the expected present discounted value of marginal damages resulting from emitting one ton of carbon today. Policy makers should set carbon prices to the SCC using a carbon tax or a competitive permits...

There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with rare disasters related to climate change. The novelty of this paper lies in linking carbon emissions...