Supply Chains & Climate Risk
Supply chain disruptions during the pandemic made average citizens aware of how vulnerable supply chains are, and how severe the knock-on effects can be. Supply chains continue to be exposed to risk in many ways: geopolitics, labour, and weather, to name a few. In this month alone, floods and atmospheric rivers have caused major disruption of supply chains, such as can be seen in the December flooding in British Columbia’s Fraser Valley and Washington state. As companies continue to manage supply chains in the face of climate change, what are the trade-offs between cost minimization and resilience? What are the […]
Carbon Leakage
When raking leaves, some folks may be tempted to push the debris from their yard into the next yard. Raking leaves is analogous to cleaning up greenhouse gas emissions, and pushing those leaves elsewhere is analogous to “carbon leakage.” What happens when one country decides, ahead of others, to implement ambitious policies to encourage carbon-neutral production? The asymmetry in climate policies can create carbon leakage, where global emissions are not reduced but are instead shifted to a different location with less stringent environmental policies. The United Kingdom has committed to reaching net zero carbon emissions by 2050. Carbon will be […]
U.S. Climate Politics
Climate change is recognized as having large effects on health and economic well-being. Peer-reviewed scientific studies show the impact of temperature/weather/pollution on mortality, GDP, health, crime, and civil conflict. Yet, according to a recent working paper series by Burke et al., adaptation to counteract the problem has been muted. “The climate change response has stalled. Are democracies equipped to handle this problem? asked Francesco Trebbi, Professor of Political Economics at the University of California, Berkeley School of Business. “Policies to curb the climate crisis, such as the carbon tax, are often democratically opposed. Are non-democracies like China better able to deal […]
Carbon Price Volatility
Greenhouse gases generated by human activities are contributing to the problem of climate change. For those who care about mitigating extreme weather and wildfires, the key global policy objective of this decade is to reduce carbon emissions. One approach is the policy known as cap-and-trade, used by jurisdictions that create about 18 percent of global emissions. “Cap-and-trade” is shorthand for emissions trading, which is a market where regulators issue a limited number of emissions permits, and firms trade these permits among each other. But lately the markets have been volatile. How well do cap-and-trade systems function when the global markets […]
Fostering Clean Growth
To address environmental concerns, many governments impose pollution regulations on companies or firms. A key goal of such regulations is to spur the development of innovative clean technologies. Empirical evidence suggests that such strategies do, in fact, work. But how effective are regional regulations when dealing with multinational corporations in a globalized economy? “Environmental policies are often confined to local jurisdictions, whereas industrial production operates on a global scale. This mismatch poses a challenge for policymakers,” said Wei Xiang, Assistant Professor of Economics at the University of Michigan. “Firms, especially multinationals, can move their pollution-intensive operations to foreign jurisdictions. This […]
Credible Scenarios
What are the best practices for environmental and climate risk management in the financial sector? Are the standard input scenarios actually suitable for financial modeling? Economic scenarios are an essential tool in assessing the financial risks of the ever-changing world. Given that the average global temperature is increasing, and storms are becoming more severe, year over year, those who construct financial models of risk must set up new, realistic scenarios. Estimating gains and losses on portfolios is difficult because of the deep uncertainty of climate impacts, but modelers must start somewhere. “Using relevant scenarios is crucial,” said Irene Monasterolo, Professor […]
Adapting Agricultural Trade
Climate change affects, and will continue to affect, agricultural productivity around the world. It is one of the inescapable ironies of our times that sub-Saharan Africa will be severely affected by climate change, despite how little it has contributed to global carbon emissions. How severe will these effects be? And is there any way to mitigate the effect on the most susceptible nations, besides curbing emissions, which appears to be a losing strategy? “Agriculture is a vulnerable sector because it is fed by rain and it is near the limits of thermal tolerance to begin with,” said Obie Porteous, Associate […]
Do People Like Nudges?
With July being the most popular travel month, bigger credit card bills start coming due. Major financial institutions are using financial nudges, such as texts or emails, that encourage consumers to make their payments in a timely fashion. But has anyone stopped to ask, “Do consumers like financial nudges?” A recent research article surveyed over two thousand Australian bank customers to determine the level of sentiment. “People generally approve of financial interventions,” concluded the authors Merle van den Akker, behavioral scientist at Commonwealth Bank of Australia and Cass Sunstein, professor at Harvard Law School. Professor Sunstein, along with Richard Thaler, […]
Inflation Fighter
What’s being done to keep the American economy running smoothly? Who’s keeping watch over things like the employment rate and purchasing power? Does anyone care about the average citizen’s standard of living? In other words, who is the sheriff in town? “What is still bothersome is we haven’t achieved price stability,” said Mary C. Daly, the President and CEO of the Federal Reserve Bank of San Francisco (FRB-SF). She defined price stability as simply: “it’s when people don’t have to worry about inflation.” She identified this as the core mission of the FRB, which “as we all know, has come […]
Global Emission Trends
As North Americans sweat through another hotter-than-average summer, observers are asking, “How close are the nations to meeting the emissions reduction goals of the 2015 Paris Agreement?” China is “the leading driver of renewable energy deployment, with record-breaking investments in solar, wind, and electric vehicles,” according to a recent report from the Centre for Economic Policy Research (CEPR), an economic think-tank. “China’s total emissions stood at 15.3 GtCO2e, but they may peak already in 2025 as its coal consumption is expected to decrease. Its success in transitioning toward carbon neutrality will significantly shape global emissions trends, making it a key […]