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.
'Safeguarding macro-financial stability under carbon pricing and rapid energy transition' (with L. Fierro, S. Reissl, F. Lamperti, L. Drouet, J. Emmerling, E. Kremer and M. Tavoni) Working paper
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 soft-link a process-based integrated assessment model (the World Induced Technical Change Hybrid, WITCH) to a macro-financial agent-based model (the Dystopian Schumpeter Meeting Keynes, DSK). The hybrid framework allows us to translate energy systems transformations into macro-financial outcomes at business cycle frequency. The results reveal that rapid transitions induced by fast-growing carbon prices significantly impact unemployment, inflation, and income distribution. Stabilization policies reduce these economic fluctuations, though not completely so in 1.5°C-compatible scenarios. Our paper emphasizes the need for coordinated climate and macroeconomic policy during decarbonization. Additionally, it showcases how model integration can lead to a better understanding of the economic implications of low-carbon futures.
'Forecasting the transition: Expectation dynamics under climate policy volatility' (with M.A Erazo Diaz, F. Lamperti, R. Terranova)
We study how climate policy volatility shapes expectations about the low-carbon transition. We run a learning-to-forecast experiment in which participants repeatedly predict short-, medium-, and long-horizon carbon taxes. Their forecasts feed a simple transition model that maps beliefs into investment outcomes, perceived transition risk and policy paths. Treatments introduce probabilistic shocks to government climate commitment, mimicking different degrees of political polarisation. To isolate expectation-driven effects, we compare experimental outcomes to a benchmark characterised by fully informed rational expectations (FIRE). Three results stand out. First, participants underweight the chance of policy shocks ex ante. Second, we find systematic post-shock overreaction -- stronger and more persistent under large policy instability -- with dispersion spiking on impact then declining over time. Third, early negative policy shocks leave lasting drags on low-carbon investment and slow down the decarbonisation process. Our results highlight credibility and timing as factors of first-order importance for effective climate policy.
'Norms vs Narratives: What drives green investment?' (with M.M. Marini, A. Tavoni)
We study how moral narratives and personal norms shape sustainable investment decisions. In a two-phase pre-registered experiment with portfolio choices involving assets that generate green or dirty externalities, participants were exposed to positive, negative, or mixed narratives evaluated ex ante by independent raters. Using conditional logit and mixed-effects models, we find no evidence that negative narratives reduce green investments, nor that positive narratives increase them beyond a short-lived effect in the first decision round. By contrast, mixed narratives significantly decrease green allocations, particularly among participants with strong pro-environmental preferences. Across specifications, personal norms consistently and positively predict green investment, while social norms play a weaker role. Green externalities influence choices only indirectly, through normative evaluations. Overall, our findings highlight the limited effectiveness of narrative interventions and point instead to personal moral norms as a more robust lever for fostering sustainable financial behaviour.
'Speculation and policy credibility in the EU Emissions Trading System' (with S. Reissl and R. Terranova)
This paper develops a dynamic behavioural model of the European Union Emissions Trading System (EU ETS) to analyse the impact of speculation and credibility shocks on permit prices and emissions. The model incorporates compliance firms and speculators, who follow distinct trading strategies -- fundamentalist, noise trading, and trend-following. Calibrated to EU ETS data, our findings reveal that speculation has a non-monotonic effect on prices and emissions: at low levels, it slightly raises prices and reduces emissions, while at higher levels, it depresses prices, delays abatement, and amplifies volatility. Negative credibility shocks significantly affect prices and emissions, with their impact depending on the timing of the shock, and speculation prolonging their effects. Finally, we examine a reform to the Market Stability Reserve (MSR) in which the upper and lower thresholds are gradually reduced. Our results show that this reform accelerates emissions reductions and enhances the system’s resilience to speculation and credibility shocks.
'Navigating electoral cycles and investment dynamics under climate policy uncertainty' (with R. Fei, F. Lamperti and R. Terranova)
This paper presents a model of the low-carbon transition, where firms allocate investments between low- and high-carbon technologies based on anticipated climate policies. A `green' and a `non-green' parties compete in regular election cycles to capture voters' evolving climate policy preferences. We calibrate and numerically simulate the model to study the interplay of political competition, voters' preferences, firms' investment choices and the low-carbon transition. We find that the non-green party has a relatively stronger influence on transition dynamics The green party's best strategy varies with the type of non-green party, as it must find a balance between (i) robust but infrequent policies; and (ii) frequent, less stringent ones. Increased party polarisation prompts firms to distribute investments more evenly across technologies, amplifying uncertainty and causing delays in the transition.
'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.
Peer-reviewed articles
Campiglio, E., Deyris, J., Romelli, D., Scalisi, G. (2025) 'Warning words in a warming world: Central bank communication and climate change'. European Economic Review 178 (105101) Link to article (open access) - Replication package
CBS Dataset (open access); Centralbanking.com; E-axes Forum Digest; The Conversation (France); VoxEU column
Campiglio, E., De Angelis. L., Neri, L., Scalisi, G. (2025) 'From climate chat to climate shock: non-linear impact of transition risk in energy CDS markets'. Environmetrics 36 (e70012). Link to article (open access)
Campiglio, E., Spiganti, A., Wiskich, A. (2024) 'Clean innovation, heterogeneous financing constraints, and the optimal climate policy mix'. Journal of Environmental Economics and Management 128 (103071). Link to article (open access) - Replication package
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) - Replication package
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) - Replication package
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
'Climate financial bubbles: How market sentiments shape the transition to low-carbon capital stock' (with A. Godin and E. Kemp-Benedict) 2017 Draft
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