Limiting global warming to well below 20C may result in the stranding of carbon-sensitive assets. This could pose substantial threats to financial and macroeconomic stability. We use a dynamic stochastic general equilibrium model with financial frictions and climate policy to study the risks a...

The European Green Deal, initiated by the EU Commission, is a package of measures aimed at decarbonization and sustainable economic development with the goal of making the European Union climate neutral by 2050. To achieve this goal, the emission reductions target must be increased from 40...

The goal to keep global warming below 2°C implies that many energy-sector assets are at risk of becoming stranded. This paper investigates whether and how investors price in stranded asset risk due to climate policy. We exploit the gradual development of a German climate policy proposal aimed...

To clarify and interpret the workings of a large computable general equilibrium (CGE) model of environmental policy in the U.S., we build an aggregated Cobb-Douglas (CD) model that can be solved easily and analytically. Its closed-form expressions show exactly how key parameters determine the...

Amidst other national and global climate protection initiatives, the new EU Commission under the leadership of Ursula von der Leyen is facing the challenge of concretely following through on previous announcements regarding an ambitious climate policy. Specifically, action must be taken to raise...

Countries have pledged to stabilize global warming at a 1.5 to 2°C increase. Either target requires reaching net zero emissions before the end of the century, which implies a major transformation of the economic system. This paper reviews the literature on how policymakers can design climate...

Donald Trump's election and his nomination of Scott Pruitt, a climate skeptic, to lead the Environmental Protection Agency drastically downshifted expectations on US climate-change policy. We study firms' stock-price reactions and institutional investors' portfolio adjustments after these...

Climate policies to keep global warming below 2 degree celsius might render some of the world fs fossil fuels and related infrastructure worthless prior to the end of their economic life time. Therefore, some energy-sector assets are at risk of becoming stranded. This paper investigates whether...