This paper studies whether climate-related adjustments to the Basel III output floor can reconcile prudential discipline with environmental objectives. We develop an environmental general equilibrium framework with endogenous default risk and regulatory risk weights to compare a standard output floor with alternative climate-oriented designs. We show that while the standard output floor stabilizes banks’ capital adequacy and Risk-Weighted Assets (RWA) density over the cycle, it delivers no significant environmental benefits. Climate-oriented output floors deliver only limited environmental improvements and introduce a trade-off with prudential discipline when the green floor is deactivated, highlighting the difficulty of jointly achieving prudential and environmental objectives through capital regulation.

In an all-electric world, there would be little danger of an anthropogenic climate crisis. Humanity came close to that state 125 years ago, as all the ingredients had been discovered or developed, together with knowledge that greenhouse gases would cause global warming. We trace those developments and why they lost out to fossil fuel-based energy, drawing lessons about market failure for the present situation. We model and forecast the energy mix for UK domestic consumption, providing a historical counterfactual had the UK taken the electric path rather than the fossil fuel path more than a century ago.

Wildfire smoke poses a growing threat to wine-producing regions, yet its economic consequences remain less understood. We study the 2020 Oregon wildfire season and estimate its impacts on retail wine sales, prices, and tasting room operations. Exploiting cross-sectional variation in smoke exposure across winery locations, we estimate that a one-standard-deviation increase in September PM${_{2.5}}$ is associated with retail sales volume declines of 15%–23% over the following three years, though the year-by-year estimates are imprecise and reach conventional significance levels only in 2023. Effects are the most prominent in Pinot Noir and Pinot Grigio, Oregon's dominant varietals. Smoke also directly reduces tasting room visits and on-site revenue in the month following a smoke event. Our results highlight how wildfire smoke damages wine producers through multiple distinct economic channels and highlight the growing financial exposure of the Oregon wine industry to wildfire events.

Several governments set the social discount rate using a Ramsey Rule that treats pure time preference as a separate parameter. Standard arguments for declining discount rates rest on uncertainty about growth or preferences, or on aggregation across people who disagree about the rate. We add a different reason: pure time preference may itself be falling over time. Real interest rates have declined for centuries, even as growth has risen. In a Ramsey framework, that pattern points to a falling pure-time-preference component. One structural explanation is selection towards patience: if patience differs across people and persists across generations, the population-weighted distribution shifts, so that the value of pure time preference used to represent society’s impatience declines not only across horizons but across generations. We illustrate with the UK Green Book, which is the most transparent Ramsey-based framework currently in use and under active review.

We empirically examine the impact of international climate finance transfers on recipient countries’ carbon emissions. We analyse the effect of mitigation and adaptation finance using emission data of 164 non-OECD countries from 2000 to 2017. We use a distributed lag model in first differences, a panel method that allows us to abstract from possible feedback from current emissions to future transfers. We address potential reverse causality while accounting for dynamic effects. We control for other factors that could be correlated with both climate finance flows and emissions. Contrary to expectations, we find that public mitigation finance tends to increase emissions, potentially due to some misreporting of development aid as climate finance. Public adaptation finance appears to drive an even greater increase in emissions. We explain this by the energy-intensive nature of adaptation measures. Transfers under the Clean Development Mechanism reduce emissions modestly after five years.

This study examines how national culture shapes the income-driven adaptation to climate change. The area of how culture could explain cultural adaptability towards country-level climate change in the current literature is underexplored. Using the environmental Kuznets curve (EKC) framework, this study investigates the influence of household lifestyle and consumption patterns on climate change adaptability across different cultural societies worldwide. Fifty-three countries were probed to determine how the cultural differences of each country define household consumption patterns linked to climate change adaptability. The findings show that cultural orientation does condition income-driven adaptability while controlling for clean energy transition and carbon intensity for institutions. This study integrates the EKC with climate adaptation, showing that non-sustainable income practices are motivated through cultural differences.

We examine willingness to donate to climate activism and test whether brief informational infographics affect donations and climate attitudes. Participants completed baseline measures of climate literacy and attitudes before random assignment in a 2 × 2 design with (i) varying information about a climate activism organization and (ii) protest versus neutral imagery. They then made an incentive-compatible allocation of up to $30 between themselves and the organization and completed a post-treatment survey. Donations were high overall, with many full-endowment donations. Organizational information reduced donations, while protest imagery attenuated this effect and increased climate concern, which was positively associated with giving.

This paper examines the dynamic impact of natural disasters on the individual acceptance of a physical form of intimate partner violence (IPV). Based on a global sample of individual survey data and historical geo-referenced records of natural disasters at a subnational level, we show that natural disasters have long-lasting effects on IPV acceptance, increasing it in the short- (0–4 years) and medium- (10–14 years) run. Furthermore, heterogeneity analyses reveal that lower-educated individuals are more affected than higher-educated individuals, men are more affected than women, and older cohorts are more affected than younger cohorts. There are no differences in the effects of disasters on IPV attitudes between individuals with high and low incomes. Drawing on theories of IPV, we also uncover that likely mechanisms that may link disasters to the increased acceptance of IPV are psychological distress and economic insecurity fears.

This study employs two measures of social support: local relatives support (LRS) and informal credit and savings group membership (IGM), from three pooled cross-sections of rural Zimbabwean farmer-households, to investigate the role of social support in the number of sustainable land management practices (SLMPs) that they adopt. The results indicate that households with greater self-sufficiency capabilities are more likely to receive social support in the form of IGM and less likely to receive it in the form of LRS. Secondly, being spatially proximate to neighbours that receive social support is associated with the farmer-household also receiving social support. Thirdly, receiving social support increases the likelihood of adopting more SLMPs. Fourthly, households without social support would have adopted more SLMPs if they had received social support. Finally, self-enforcing social support in the form of IGM is associated with a higher likelihood of SLMP adoption compared to LRS, which depends on relatives’ benevolence.

The link between climate change and gender is intricate, particularly in developing countries, where women are disproportionately affected due to lower adaptive capacity and economic opportunities. This study investigates the gendered economic impacts of climate change in South Africa using a recursive dynamic computable general equilibrium model. Results reveal that climate-induced shocks reduce productivity, labour demand and economic growth, leading to higher prices and reduced purchasing power. Female-headed households face greater poverty impacts than their male counterparts. These findings highlight the need for gender-responsive social protection policies that support women in vulnerable sectors such as agriculture and tourism. Targeted interventions such as combining compensatory transfers with investments in education, skills development and access to resilient livelihoods are essential to mitigate gender inequality and strengthen women’s economic resilience in the face of climate change.

Climate change impacts are expected to be unevenly distributed across locations and population groups. However, to date, evidence on the effects of warming on within-country inequality remains limited. In this paper, we test the relationship between gradual warming (i.e., climate change) and long-run distributional dynamics within countries, using a global panel dataset over the period 1955–2015. We find that warming increases overall income inequality, as well as the concentration of income at the top of the income distribution. We also show that these effects persist over time. We complement our main findings with an exploratory analysis of the relationship between warming and several additional dimensions of inequality, including the concentration of wealth, inequality in the spatial distribution of economic activity within countries, and measures of inequality in life expectancy. Overall, our analysis presents a rich picture of the far-reaching distributional effects of global warming.

This paper examines the impact of low-carbon transition risks on sovereign borrowing costs. Using two unbalanced panel datasets covering 125 countries from 1995 to 2019, we estimate extended models of the macroeconomic determinants of short- and long-term sovereign debt costs. We include key indicators capturing exposure to transition risks, such as fossil resource abundance, the carbon intensity of GDP, and the share of renewable energy in total energy consumption. Results show that fossil resource abundance and a higher renewable energy share are associated with lower borrowing costs, whereas greater carbon intensity raises sovereign debt costs. Financial markets therefore appear to reward fossil resource endowments while penalizing carbon-intensive uses of these resources. This reveals a contradictory signal: fossil resource wealth lowers the cost of public borrowing, as it is perceived as a form of implicit collateral, while the actual use of these resources increases borrowing costs, reflecting a carbon risk premium.

Climate change is expected to significantly affect the physical, financial, and economic environments over the long term, posing risks to the financial health of general insurers. While general insurers typically use Dynamic Financial Analysis (DFA) for a comprehensive view of financial impacts, traditional DFA as presented in the literature does not consider the impact of climate change. To address this gap, we extend the stationary DFA framework to integrate climate risk, enabling a holistic assessment of the long-term impact of climate change on the general insurance industry and offering a foundational architecture for the DFA of individual insurers. Our framework captures the long-term impact of climate change on the assets and liabilities of general insurers by considering both physical and economic dimensions across different climate scenarios within an interconnected structure. Furthermore, it addresses the uncertainty of climate change impacts using stochastic simulations within climate scenario analysis that are useful for actuarial applications. Our extensions are tailored to the general insurance sector and address its unique characteristics. To demonstrate the practical application of our model, we conduct an extensive empirical study using Australian data and assess the long-term financial impact of climate change on the general insurance market under various climate scenarios. The results are benchmarked against those of a stationary DFA framework and show that the interaction between economic growth and physical risk plays a key role in shaping general insurers’ risk–return profiles. They highlight the advantages of the climate-dependent DFA over the stationary DFA in generating financial projections under climate change impacts. Limitations of our framework are thoroughly discussed.

This study investigates the causal impact of temperature on labour productivity within Indonesia’s household-based enterprises. We combine rich, household-based data on micro and small enterprises from the Indonesian Family Life Survey with historical temperature data to estimate the effect of temperature on labour productivity, which we measure as revenue and revenue per worker. Our empirical strategy leverages plausibly exogenous, time-varying temperature fluctuations within specific geographic areas. The findings reveal a significant negative relationship: a 1°C increase in the 12-month average temperature deviation is associated with a 14 per cent reduction in enterprise revenue and a 21 per cent decrease in revenue per worker. Furthermore, we find that the effect of temperature on labour productivity follows an inverted U-shape and disproportionately impacts smaller businesses. Our study highlights the vulnerability of the informal sector to rising temperatures and underscores the urgent need for targeted policies aimed at enhancing the climate resilience of household-based enterprises.

We surveyed economics and finance professionals on the transition to a low-carbon economy, assessing risks, opportunities and stakeholder responsibilities. Findings reveal that respondents view the transition as an opportunity for the financial sector, with a modest increase in banking risks. Most respondents agreed that governments hold the primary responsibility for climate mitigation policies, with carbon tax as the favoured solution. Additionally, respondents perceived the COVID-19 pandemic to have a neutral or positive impact on the transition, while the Ukraine war to have a strong negative impact. Notably, opinions differ based on environmental consciousness and professional roles, with environmentally conscious individuals expressing more optimism.

Extreme precipitation events have become more frequent and severe in recent years, leading to devastating natural disasters around the world. This paper investigates the impacts of extreme rainfall on corporate leverage dynamics. We find that the increase of extreme precipitation brings about a significant drop in firm’s leverage. The channel tests show that extreme rainfall would generate the recession of firm’s balance sheet and thus tighten the financing constraints, inducing firm to cut down leverage. On the other hand, intense rainfall would depress the land price and heighten local government’s debt risk, which crowds out the credit resources allocated to private sector, contributing to the deleveraging of firms. Simulations from the new Keynesian DSGE model with extreme rainfall shock and local government land finance system, lend further support to our empirical findings. Furthermore, our model shows that the welfare cost of extreme rainfall risk can amount to 2.2% of the agent’s lifetime utility. Lower welfare cost can be achieved by accommodating monetary policy and active fiscal policy.

This study explores the heterogeneous and asymmetric macro-financial effects of weather-related shocks in Central, Eastern and Southeastern European countries, depending on the level of underlying macro-financial vulnerabilities. Focusing solely on acute physical risks – those arising from extreme weather events – it employs panel quantile regression analysis to examine data from 2000Q1–2022Q4 for 17 countries in the region. Notably, we find that weather shocks – particularly droughts, floods, heatwaves and wildfires – exacerbate macroeconomic and financial imbalances, increasing the susceptibility of already vulnerable economies to additional risks. Specifically, countries with higher economic imbalances suffer more severe output disruptions and heightened inflationary pressures following a weather shock. While the immediate impact of climate shocks on external imbalances is limited, countries with existing vulnerabilities may still encounter longer-term pressures on trade and investment patterns. Additionally, extreme weather events can intensify financial vulnerabilities for countries that are already grappling with lower levels of financial resilience.

We describe the main insights from the papers included in this special issue, Challenges for the Development of Latin America in the Anthropocene: Current Research in Environmental Economics. The contributions are organized around three themes: the economic and welfare impacts of temperature variability, the role of institutions and user rights in shaping environmental governance and the effectiveness of regulatory instruments for managing ambient and atmospheric pollution. Together, these papers show that environmental outcomes in Latin America are deeply shaped by institutional capacity, governance quality and social inequality. By combining rigorous empirical analysis with attention to local contexts, they demonstrate how environmental economics can inform policy responses to the triple planetary crisis of climate change, biodiversity loss and pollution.

This paper presents a macroeconomic framework for carbon markets. We set up a global climate-economy with carbon-intensive energy inputs, renewable energy, natural carbon sinks, and a carbon capture technology to show that (i) within a comprehensive carbon pricing system, a carbon tax alone implements any given path of carbon emissions; (ii) ‘additionality’ is not a property of the optimal carbon pricing system; and (iii) without a carbon tax, renewable subsidies, preservation of carbon sinks and a price for carbon capture are needed.

To enhance the supervision of regional environmental issues, China initiated a nationwide campaign in 2007 to establish environmental courts and formulate local environmental regulations. This study selected Shanghai and Shenzhen A-share listed companies from 2004 to 2021 as its research sample to examine the impact of local environmental legislation and the establishment of environmental courts on corporate carbon emissions. The findings indicate that the combined effect of these measures significantly curbs carbon emissions. Additionally, the study identifies that the intensity of local environmental court establishment and the implementation of corporate pollution charges or environmental protection taxes are critical mechanisms through which environmental legislation and court establishment reduce corporate carbon emissions. Finally, the interaction of environmental legislation and court establishment on corporate carbon emissions is most pronounced in regions where the government exhibits lower environmental concern, in state-owned enterprises, in enterprises located in the eastern region and in highly polluted cities.