The Carbon Bubble : Climate Policy in a Fire-sale Model of Deleveraging

Comerford, David and Spiganti, Alessandro (2017) The Carbon Bubble : Climate Policy in a Fire-sale Model of Deleveraging. Preprint / Working Paper. University of Strathclyde, Glasgow.

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Abstract

Credible implementation of climate change policy, consistent with the 2oC limit, requires a large proportion of current fossil fuel reserves to remain unused. This issue, named the Carbon Bubble, is usually presented as a required asset write-off, with implications for investors. For the first time, we discuss its implications for macroeconomic policy and for climate policy itself. We embed the Carbon Bubble in a macroeconomic model exhibiting a financial accelerator: if investors are leveraged, the Carbon Bubble may precipitate a fire-sale of assets across the economy, and generate a large and persistent fall in output and investment. We find a role for policy in mitigating the Carbon Bubble.

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• Item metadata

  Item type:	Monograph(Preprint / Working Paper)
  ID code:	65793
  Dates:	Date Event 17 November 2017 Published
  Notes:	No 17-14 of the "Discussion Papers in Economics" series.
  Subjects:	Social Sciences > Economic Theory Geography. Anthropology. Recreation > Environmental Sciences
  Department:	Strathclyde Business School > Economics
  Depositing user:	Pure Administrator
  Date deposited:	16 Oct 2018 09:44
  Last modified:	16 Apr 2024 00:38
  URI:	https://strathprints.strath.ac.uk/id/eprint/65793