Finance and climate change: Investigating the interconnection between energy prices, green finance, emissions and monetary policy

Principal investigator (project leader): Prof. Claudiu ALBULESCU

Description / Summary

The climate crisis represents a global phenomenon, being connected with the financial system. Under the Paris Agreement, it was concluded that financial flows should be consistent with low-emissions, to protect the natural world. On the one hand, the financial system contributes to climate change if it carries on with financing polluting activities. On the other hand, the negative effects of climate change impact the financial activities. Indeed, extreme climate events generate massive financial losses. This evidence shows that climate and financial goals should be aligned. Therefore, new research approaches are necessary to knuckle down the interconnection between finance and climate change, considering multiple financial and environmental dimensions. Against this background, the purpose of the present research project is to investigate the inter-linkages between energy prices, green finance, carbon emissions and monetary policy, on three research directions. The first direction relates to the asymmetric impact of green finance on climate change. There are huge discrepancies among countries in terms of using green finance instruments. Thus, carbon emissions might respond differently to changes in the green finance activity. The second direction addresses the complex interconnections between energy prices and green bonds, based on network analyses. The third direction investigates the monetary policy response to climate change.