Emanuele Campiglio

• PhD in Economics
• Professor (Associate) at University of Bologna

It is still unclear to what extent transition risks are being internalized by financial investors. In this paper, we provide a novel investigation of the impact of media‐based measures of transition risks on the credit risk of energy companies, as measured by their credit default swaps (CDS) indices. We include both European and North American mark...

Although the case for a swift climate transition is clear, its macro-financial viability remains uncertain. To shed light on the macroeconomic and financial response to deep mitigation trajectories controlled by carbon pricing, we integrate a process-based integrated assessment model into a macroeconomic agent-based model. The hybrid framework allo...

It is still unclear to what extent transition risks are being internalised by financial investors. In this paper, we provide a novel investigation of the impact of media-based measures of transition risks on credit risk of energy companies, as measured by their CDS indices, in both Europe and North America. Using linear and non-linear local project...

It is still unclear to what extent transition risks are being internalised by financial investors. In this paper, we provide a novel investigation of the impact of media-based measures of transition risks on credit risk of energy companies, as measured by their CDS indices, in both Europe and North America. Using linear and non-linear local project...

This paper analyzes the cross-border risks that could result from a decarbonization of the world economy. We develop a typology of cross-border risks and their respective channels. Our qualitative and quantitative scenario analysis suggests that the mid-transition – a period during which fossil-fuel and low-carbon energy systems co-exist and transf...

We study how conflicting beliefs on future transition dynamics interact with short-termist preferences in shaping investment decisions. We develop a simple model where firms choose between two technological options (high-and low-carbon) based on their expected profitability over a finite planning horizon. Profit expectations depend on beliefs about...

The optimal transition to a low-carbon economy must account for adjustment costs in switching from dirty to clean capital, technological progress, and economic and climatic shocks. We study the low-carbon transition using a dynamic stochastic general equilibrium model with emissions abatement costs calibrated on a large energy modelling database, s...

A disorderly transition to a low-carbon economy may pose significant costs for both financial and nonfinancial firms through the stranding of physical assets, firms’ defaults, and volatility in asset prices. The spread of these disruptions through production and financial networks may exacerbate transition costs. Green financial and monetary polici...

The financial risks and potential systemic impacts induced by climate change and the transition to a low‐carbon economy have become a central issue for both financial investors and their regulators. In this article, we develop a critical review of the empirical and theoretical literature concerning the impact of climate‐related risks on the price o...

COVID-19 has revealed how challenging it is to manage global, systemic and compounding crises. Like COVID-19, climate change impacts, and maladaptive responses to them, have potential to disrupt societies at multiple scales via networks of trade, finance, mobility and communication, and to impact hardest on the most vulnerable. However, these compl...

This article studies how institutional dynamics might affect and be affected by the implementation of climate-related financial policies. First, we propose a three-dimensional framework to distinguish: i) motives for policy implementation (prudential or promotional); ii) policy instruments (informational, incentive-based or quantity-based); and iii...

As the impacts of climate change begin to take hold, increased attention is being paid to the consequences that might occur remotely from the location of the initial climatic impact, where impacts and responses are transmitted across one or more borders. As an economy that is highly connected to other regions and countries of the world, the Europea...

A timely low-carbon transition will require a significant decline in fossil fuel production and consumption. This in turn exposes the rest of economic sectors to the risk of reduced usability of physical capital stocks via international production network linkages. We propose and apply a simple measure to assess the extent to which fossil shocks mi...

Climate change impacts, adaptation and vulnerability studies tend to confine their attention to impacts and responses within the same geographical region. However, this approach ignores cross-border climate change impacts that occur remotely from the location of their initial impact and that may severely disrupt societies and livelihoods. We propos...

The macro-financial transition risks that result from disorderly transitions to a carbon-free or low-carbon economy may entail significant costs due to the risk of stranded assets, defaults, collapse in stock market value, both for financial firms and non-financial firms. The effects of networks, contagion, and higher-round effects of stranding may...

This article studies how institutional dynamics might affect the implementation of climate- related financial policies. First, we propose a three-dimensional framework to distinguish: i) motives for policy implementation (prudential or promotional); ii) policy instruments (informational, incentive or coercive); and iii) implementing authorities (po...

The aim of this article is to assess the exposure of economic systems to the risk of physical capital stranding following a reduction of fossil fuel production and use. We calculate cross-sectoral and cross-country `marginal stranding multipliers' for 43 regions, and study how supply-side capital stranding might propagate via international producti...

Joint CASCADES–RECEIPT policy brief

This report provides a review - based on both literature and data sources - of the current linkages between the European Union (EU-27) and other world regions from the perspective of the three pillars of the Cascades project: trade (supply chains), financial investments (equity and debt-based), and security and development concerns (migration, over...

The transition to a low‐carbon economy will entail a large‐scale structural change. Some industries will have to expand their relative economic weight, while other industries, especially those directly linked to fossil fuel production and consumption, will have to decline. Such a systemic shift may have major repercussions on the stability of finan...

This note reviews the empirical evidence available in the academic literature about the impact of climate-related risks on financial assets. It addresses three main questions: does climate change already affect financial asset returns? What is the potential impact of future climate-related costs on financial asset prices? Do financial markets adequ...

Herman Daly's view of the economy as an 'inverted pyramid' sitting on top of essential raw material inputs is compelling, but not readily visible in monetary data, as the contribution of primary sectors to value added is typically low. This article argues that 'forward linkages', a classical development theory concept capturing the relevance of a s...

This article develops a novel methodological framework to investigate the exposure of economic systems to the risk of physical capital stranding. Combining Input-Output (IO) and network theory, we define measures to identify both the sectors likely to trigger relevant capital stranding cascades and those most exposed to capital stranding risk. We s...

The academic and policy debate regarding the role of central banks and financial regulators in addressing climate-related financial risks has rapidly expanded in recent years. This Perspective presents the key controversies and discusses potential research and policy avenues for the future. Developing a comprehensive analytical framework to assess...

This paper investigates the implications of the policy changes triggered by the Global Financial Crisis on the transition to a low-carbon society. The immediate effects have mostly been negative: national governments have retracted from public spending and fiscal support to clean technologies; new macroprudential regulation has discouraged banks fr...

This study employs a number of Integrated Assessment Models to determine what the optimal financial transfers between high-income and developing economies would be if climate mitigation effort, measured as mitigation costs as a share of gross domestic product, were to be divided equally across regions through a global carbon market. We find these t...

It is widely acknowledged that introducing a price on carbon represents a crucial precondition for filling the current gap in low-carbon investment. However, as this paper argues, carbon pricing in itself may not be sufficient. This is due to the existence of market failures in the process of creation and allocation of credit that may lead commerci...

Integrated assessment models can help in quantifying the implications of international climate agreements and regional climate action. This paper reviews scenario results from model intercomparison projects to explore different possible outcomes of post-2020 climate negotiations, recently announced pledges and their relation to the 2 °C target. We...

An expansion of economic activities with low impact on ecological resources is a crucial component of the transition to a low-carbon society. “Green” structural change is analysed here through a model with a “progressive” and a “stagnant” sector. The latter represents an increasingly demanded class of services characterized by high intensity of lab...

Transitioning to a low-carbon economy will require significant investment to transform energy systems, alter the built environment and adapt infrastructure. A strategy to finance this investment is needed if the limit of a 2°C increase in global mean temperatures is to be respected. Also, high-income countries have pledged to pay the "agreed full i...

This paper presents a small macroeconomic model describing the main mechanisms of the process of creation by the private banking system. The model is composed of a core unit—where the dynamics of income, credit and aggregate demand are determined—and a set of sectoral accounts that ensure its stock-flow consistency. In order to grasp the role of cr...

We present an example of how public policies affect the evolution of the economy by influencing consumption habits, life styles and work attitudes. In particular, we show that governments can boost long-run growth by moving public investment away from collective transportation systems and towards infrastructures necessary for using private vehicles...

Recent international environmental negotiations have highlighted the absence of a commonly agreed approach to attribute climate change responsabilities. In this paper I investigate how the mechanism of attribution is likely to affect optimal emissions reduc-tion paths, focusing in particular on energy-saving R&D investments and on technolog-ical di...