Research

Work in progress

'Optimal climate policy as if the transition matters' (with S. Dietz and F. Venmans) Working paper R&R at Review of Economic Studies

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, solved with recursive methods. We show how capital inertia puts upward pressure on emissions and temperatures in the short run, but that nonetheless it is optimal to actively disinvest from -- to `strand' -- a significant share of the dirty capital stock. Conversely, clean technological progress, as well as uncertainty about climatic and economic factors, lead to lower emissions and temperatures in the long run. Putting these factors together, we estimate a net premium of 33% on the optimal carbon price today relative to a `straw man' model with perfect capital mobility, fixed abatement costs and no uncertainty.

'Clean innovation, heterogeneous financing constraints, and the optimal climate policy mix' (with A. Spiganti and A. Wiskich) Working paper R&R at Journal of Environmental Economics and Management

Access to finance is a major barrier to clean innovation. We incorporate a financial sector in a directed technological change model, where research firms working on different technologies raise funding from financial intermediaries at potentially different costs. We show that, in addition to a rising carbon tax and a generous but short-lived clean research subsidy, optimal climate policies include a clean finance subsidy directly aimed at reducing the financing cost differential across technologies. The presence of an endogenous financing experience effect induces stronger mitigation efforts in the short-term to accelerate the convergence of heterogeneous financing costs. This is achieved primarily through a carbon price premium of 39\% in 2025, relative to a case with no financing costs.

'From climate chat to climate shocks: Nonlinear impacts of transition risk in energy CDS markets' (with Luca De Angelis, P. Neri and Ginevra Scalisi) Working paper Submitted

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 projections, we find that, in both jurisdictions, a transition risk shock affects CDS indices only when combined with tangible physical climate-related impacts. We also find evidence of non-linear cross-border effects, with North American energy companies particularly affected by European dynamics. We suggest that the public reaction in the wake of severe natural disasters, which might push policy-makers to adopt more decisive climate action,  contribute to making the transition-related debate salient in the eyes of credit market actors.

'Warning words in a warming world: Central bank communication and climate change' (with D. Romelli and J.  Deyris)

We study climate-related central bank communication using a novel dataset containing 32,359 speeches from 131 central banks over the 1986-2021 period. We employ natural language processing techniques to identify three evolving climate-related narratives centred around `sustainable development', `green finance' and `climate-related financial risks'. We find central bank public communication strategies to be primarily driven by underlying institutional factors. Finally, we study the impact of communication on equity prices and find that firms characterised by better environmental scores benefit from the more frequent and intense engagement of central banks on climate-related topics. 

'The network effects of carbon pricing' (with H. Massoni and S. Trsek)

We develop a macroeconomic model to study how carbon pricing initiatives could affect the global economy via international production networks. Using sector- and country-specific data, we estimate the impact of three policies: (i) a global uniform tax; (ii) an EU-only tax; and (iii) an EU-only tax combined with a carbon border adjustment mechanism. Our results show that the distribution of tax-induced socioeconomic losses across sectors and countries critically depends on their relative position within global value chains. Negative impacts triggered by demand shocks in downstream sectors (and propagating upstream) appear to be stronger than that of direct taxation. We also find carbon pricing policies to reconfigure the structure of the international production network, with some countries/sectors becoming more marginal and others more central. Marginalisation on the intermediate input market is salient for countries imposing unilateral carbon policies.

'Guardians of the regime: The dual role of finance in socio-technical transition' (with J.  Deyris, F. Geels and C. Schroeder)

Transitioning to a carbon-free economy will involve two intertwined dynamics: the phase-in of low-carbon niches and the phase-out of incumbent high-carbon sectors.  Correspondingly, effective climate change mitigation implies both the greening of new investments and the early retirement (or ‘stranding’) of incumbent high-carbon assets. Finance plays a key role in both dynamics, determining the pace and smoothness of phase-ins and phase-outs. However, it is still unclear (i) whether financial systems are currently ‘fit for purpose’; (ii) which transformation they might have to go through to support an orderly transition; (iii) and how this transformation should come about. Building on the socio-technical transitions literature and on the insights from a set of interviews with European central bankers, regulators, financial actors and energy incumbents and other primary sources, we investigate the policy and feedback effects that can shape the co-evolutionary dynamics between the finance and energy regimes throughout the low-carbon transition. Our results will shed light on the role that central banks can assume to accommodate a smooth low-carbon transition of the financial regime. 

'Designing just climate policies accounting for international production networks' (with E. Shears)

'Speculation and policy credibility in the EU Emissions Trading System' (with S. Reissl and R. Terranova)

'Navigating electoral cycles and investment dynamics under climate policy uncertainty' (with R. Fei, F. Lamperti and R. Terranova)

'Transition expectations and policy uncertainty: an experimental approach' (with M.A. Erazo Diaz, F. Lamperti and R. Terranova)

'Macroeconomic Transition Risks in a Hybrid Agent-Based Integrated Assessment Model' (with L. Fierro, F. Lamperti, L. Drouet, J. Emmerling, A. Roventini and M. Tavoni)

'Climate financial bubbles: How market sentiments shape the transition to low-carbon capital stock' (with A. Godin and E. Kemp-Benedict) 2017 Draft

Peer-reviewed articles

Campiglio, E., Lamperti, F., Terranova, R. (2024) 'Believe me when I say green! Heterogeneous expectations and climate policy uncertainty'. Journal of Economic Dynamics and Control 165 (104900). Link to article (open access)

Cahen-Fourot, L., Campiglio, E., Daumas, L., Miess, M., Yardley, A. (2023) 'Stranding ahoy? Heterogeneous transition beliefs and capital investment choices'. Journal of Economic Behavior & Organization 216, 535-567. Link to article (open access)

Campiglio, E., Daumas, L., Monnin, P. von Jagow, A. (2022) 'Climate-related risks in financial assets'. Journal of Economic Surveys 37(3), 950-992.  Link to article (open access)

Campiglio, E., van der Ploeg, F. (2022) 'Macrofinancial risks of the transition to a low-carbon economy'. Review of Environmental Economics and Policy 16(2), 173-195. Link to article Paper PDF

Ringsmuth, A.K., Otto, I.M., van den Hurk, B., Lahn, G., Reyer, C.P.O., Carter, T.R., Magnuszewski, P., Monasterolo, I., Aerts, J.C.J.H., Benzie, M., Campiglio, E., Fronzek, S., Gaupp, F., Jarzabek, L., Klein, R.J.T., Knaepen, H., Mechler, R., Mysiak, J., Sillmann, J., Stuparu, D., West, C. (2022) 'Lessons from COVID-19 for managing transboundary climate risks and building resilience', Climate Risk Management 35, 100395. Link to article (open access)

West, C.D., Stokeld, E., Campiglio, E., Croft, S., Detges, A., Duranovic, A., von Jagow, A., Jarząbek, Ł, König, C., Knaepen, H., Magnuszewski, P., Monasterolo, I., Reyer, C.P.O. (2021) 'Europe's cross-border trade, human security and financial connections: A climate risk perspective', Climate Risk Management 34, 100382. Link to article (open access)

Cahen-Fourot, L., Campiglio, E., Godin, A., Kemp-Benedict, E., Trsek, S. (2021) 'Capital stranding cascades: The impact of decarbonisation on productive asset utilisation', Energy Economics 103, 105581. Link to article (open access)

Baer, M., Campiglio, E., Deyris, J. (2021) 'It takes two to dance: Institutional dynamics and climate-related financial policies', Ecological Economics 190, 107210. Link to article (open access)

Carter, T.R., Benzie, M., Campiglio, E., Carlsen, H., Fronzek, S., Hildén, M., Reyer, C.P.O., West, C. (2021) 'A conceptual framework for cross-border impacts of climate change', Global Environmental Change 69, 102307. Link to article (open access)

Semieniuk, G., Campiglio, E., Mercure, J.F., Volz, U., and Edwards, N. (2021) 'Low-carbon transition risks for finance', WIREs Climate Change, 12(1). Link to article (open access)

Cahen-Fourot, L., Campiglio, E., Dawkins, E., Godin, A., Kemp-Benedict, E. (2020) 'Looking for the Inverted Pyramid: An Application Using Input-Output Networks', Ecological Economics 169, 106554. Link to article

Campiglio, E., Dafermos, Y., Monnin, P., Ryan-Collins, J, Schotten, G. and Tanaka, M. (2018) 'Climate change challenges for central banks and financial regulators', Nature Climate Change, 8, 462-468. Link to article

Bowen, A., Campiglio, E., Herreras Martinez, S. (2017) ‘An 'equal effort' approach to assessing the North-South climate finance gap’, Climate Policy, 17 (2), pp. 231-245. Link to article Working paper

Campiglio, E. (2016) ‘Beyond carbon pricing: The role of banking and monetary policies in financing the transition to a low-carbon economy’, Ecological Economics, 121, pp.220-230. Link to article Working paper

Tavoni, M., Kriegler, E., Riahi, K., van Vuuren, D.P., Aboumahboub, T., Bowen, A., Calvin, K., Campiglio, E., Kober, T., Jewell, J., Luderer, G., Marangoni, G., McCollum, D., van Sluisveld, M., Zimmer, A., and van der Zwaan, B. (2015) ‘Post-2020 climate agreements in the major economies assessed in the light of global models’, Nature Climate Change, 5 (2), pp.119-126. Link to article

Campiglio, E. (2014) ‘The structural shift to green services: A two-sector growth model with public capital and open-access resources’, Structural Change and Economic Dynamics, 30, pp.148-161. Link to article Working paper

Bowen, A., Campiglio, E., and Tavoni, M. (2014) ‘A macroeconomic perspective on climate change mitigation: Meeting the financing challenge’, Climate Change Economics, 5 (1). Link to article Working paper

Bernardo, G. and Campiglio, E. (2014) ‘A simple model of income, aggregate demand and the process of credit creation by private banks’, Empirica, 41 (3), pp.381-405. Link to article Working paper

Bonatti, L., Campiglio, E. (2013) ‘How can transportation policies affect growth? A theoretical analysis of the long-term effects of alternative mobility systems’, Economic Modelling, 31, pp.528-540. Link to article Working paper

Book chapters

Campiglio, E. (2019) ‘Financial regulators and sustainable development’, in Chiappero, E. (Ed.) The rules of Utopia, Fondazione Giangiacomo Feltrinelli, Milano, pp. 109-125 Chapter

Campiglio, E., Cahen-Fourot, L. and Monasterolo, I. (2018) ‘Finance and sustainability’ in Lutter, S., Luks, F., Stagl, S. (Eds.), Towards a Socio-Ecological Transformation of the Economy, Background Report for “Growth in Transition”, Vienna, pp. 49-59 Chapter 

Campiglio, E., Godin, A., Kemp-Benedict, E. and Matikainen, S. (2017) 'The tightening links between financial systems and environmental issues', in Arestis, P., and Sawyer, M., Economic policies since the Global Financial Crisis, Palgrave Macmillan, London, pp. 313-356 Chapter

Books

Campiglio, E. (2013) 'Green Economy' (Original title: 'Sai cos’è la green economy?'), 50pp., Bruno Mondadori, Milano. [Link]

Campiglio, E. (2012) 'The good economy' (Original title: 'L’economia buona'), 172 pp., Bruno Mondadori, Milano. [Link]

Campiglio, E. (2010) 'With the world on shoulders: Global issues and limits to growth' (Original title: 'Con il mondo sulle spalle. Questioni globali e limiti alla crescita'), 180 pp., OMP Editore, Pavia. [Downloadable]

Other publications

Espagne, E., Oman, W., Mercure, J-F., Pollitt, H., Svartzman, R., Volz, U., Semieniuk, G., and Campiglio, E. (2023) 'Cross-border risks of a global economy in mid-transition', IMF Working Paper No. 2023/184, International Monetary Fund, Washington D.C. Link

Campiglio, E. Lamperti, F. (2022) 'Sustainable finance policy-making: Why and how', European Economy: Banks, Regulation and the Real Sector, 2021.2, Link

Van den Hurk, B., Otto, I. et al. (2020) ‘What can COVID-19 teach us about preparing for climate risks in Europe?’, Policy Brief, CASCADES and RECEIPT Link

Campiglio, E. (2020) 'Low-carbon macro-financial transitions: What could go wrong?', EAERE Magazine, n.10 Link

Dollman, R., Vannicelli, G., Eis J., Campiglio, E. (2020) ‘Low-carbon transitions and systemic risk’, Vivid Economics, March 2020 Download

Campiglio, E., Gnan, E. and Monasterolo, I. (2018) 'Green finance, regulation and monetary policy', Conference report, Oesterreichische Nationalbank. Download

Matikainen, S., Campiglio, E. and Zenghelis, D. (2017) 'The climate impact of quantitative easing', Policy Paper, Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science Download

Campiglio, E. (2012) 'Who should pay for climate? The effect of burden-sharing mechanisms on abatement policies and technological transfers', Grantham Research Institute Working Papers, 114  Download

Campiglio, E. (2012) 'The value of green' (Original title: 'Il valore del verde'), Per la Storia Mail, 54-55, p.13-18 Download