Fiscal Policy and Ecological Sustainability: A Post-Keynesian Perspective

Dafermos, Yannis; Nikolaidi, Maria

doi:10.1007/978-3-030-23929-9_7

Cited by 34 publications

(30 citation statements)

References 62 publications

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“…First, abatement costs (which in our model are captured by investment expenditures on green energy and sequestration capital) do not just represent an outflow for the firm sector as a whole; they represent, at the same time, an inflow to those firms that produce the related capital. Hence, in our model abatement costs do not reduce GDP and the net flows of the firm sector (see also Dafermos and Nikolaidi, 2019;Mercure et al, 2019). Second, in our model a part of the abatement expenses are covered though bank loans and bond finance and the amount of financial resources is not finite at a specific point in time (i.e.…”

Section: Key Equationsmentioning

confidence: 94%

“…There are two reasons why we have opted for such a policy mix instead of an isolated carbon tax policy. First, this policy mix can bring about more substantial outcomes in terms of an increase in green investment and carbon emissions reduction (see Dafermos and Nikolaidi, 2019;Bovari et al, 2018b;Bovari et al, 2020). Second, broadly speaking, the distribution of the carbon tax revenues to the economy via green subsidies is politically a much more realistic scenario given the significant distributional effects of a carbon tax policy (for these effects see e.g.…”

Section: Combining Green Differentiated Capital Requirements With Grementioning

confidence: 99%

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How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis

Dafermos

Nikolaidi

2021

Journal of Financial Stability

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Using an ecological macrofinancial model, we explore the potential impact of the 'green supporting factor' (GSF) and the 'dirty penalising factor' (DPF) on climate-related financial risks. We identify the transmission channels by which these green differentiated capital requirements (GDCRs) can affect credit provision and loan spreads, and we analyse these channels within a dynamic framework in which climate and macrofinancial feedback effects play a key role. Our main findings are as follows. First, GDCRs can reduce the pace of global warming and decrease thereby the physical financial risks. This reduction is quantitatively small, but is enhanced when the GSF and the DPF are implemented simultaneously or in combination with green fiscal policies. Second, the DPF reduces banks' credit provision and leverage, making them less fragile. Third, both the DPF and the GSF generate some transition risks: the GSF increases bank leverage because it boosts green credit and the DPF increases loan defaults since it reduces economic activity. These effects are small in quantitative terms and are attenuated when there is a simultaneous implementation of the DPF and the GSF. Fourth, fiscal policies that boost green investment amplify the transition risks of the GSF and reduce the transition risks of the DPF; the combination of green fiscal policy with the DPF is thereby a potentially effective climate policy mix from a financial stability point of view.

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Section: Key Equationsmentioning

confidence: 94%

Section: Combining Green Differentiated Capital Requirements With Grementioning

confidence: 99%

How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis

Dafermos

Nikolaidi

2021

Journal of Financial Stability

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“…First, the loss of assets and income increases the likelihood of default on debt; therefore, banks could see their share of nonperforming loans grow. Higher ratios of nonperforming loans could in turn reduce the profitability of the lending bank, affect its market valuation, and, if the phenomenon is significant enough, lead to a bank run and its default (Dafermos & Nikolaidi, 2019b; Diamond & Dybvig, 1983). The magnitude of this effect depends on how exposed the banking system is to industries that will have to decline as part of the low‐carbon transition (see Vermeulen et al (2019) and Giuzio et al (2019) for data concerning Dutch and eurozone banks).…”

Section: A Model and Classification Of Low‐carbon Transition Risksmentioning

confidence: 99%

Low‐carbon transition risks for finance

Semieniuk

Campiglio

Mercure

et al. 2020

WIREs Climate Change

217

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The transition to a low‐carbon economy will entail a large‐scale structural change. Some industries will have to expand their relative economic weight, while other industries, especially those directly linked to fossil fuel production and consumption, will have to decline. Such a systemic shift may have major repercussions on the stability of financial systems, via abrupt asset revaluations, defaults on debt, and the creation of bubbles in rising industries. Studies on previous industrial transitions have shed light on the financial transition risks originating from rapidly rising “sunrise” industries. In contrast, a similar conceptual understanding of risks from declining “sunset” industries is currently lacking. We substantiate this claim with a critical review of the conceptual and historical literature, which also shows that most literature either examines structural change in the real economy, or risks to financial stability, but rarely both together. We contribute to filling this research gap by developing a consistent theoretical framework of the drivers, transmission channels, and impacts of the phase‐out of carbon‐intensive industries on the financial system and on the feedback from the financial system into the rest of the economy. We also review the state of play of policy aiming to protect the financial system from transition risks and spell out research implications. This article is categorized under: Climate Economics > Economics and Climate Change

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“…The 'eco-sustainable framework' developed within post-Keynesian economics focuses on the stimulation of the cumulative effective demand for environmental-based goods and services and on setting ecological rules that will redirect capital investment to resource-saving technologies with long-term carrying capacities [9]. Instruments of state regulation may include developing systems of taxes and tax incentives, cancelling all fossil fuel subsidies [10], creating a buffer reserve of non-renewable resources [11], reducing labour intensity and cutting working hours [12].…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Greening of Regional Economic Systems Within the Framework of Sustainable Development Goals

Lavrikova¹,

Buchinskaia²,

Wegner-Kozlova³

2021

EoR

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Sustainable development was chosen by the United Nations as the key concept of the future in the 21st century, which led to the emergence of other economic concepts, such as green and blue economy, seen as contributing to the achievement of sustainable development goals (SDGs). In Russia, despite the ongoing processes of green transformation in some economic sectors and certain improvements in the green legislation and green finance, not all businesses and regions are ready to embrace sustainable development. This paper discusses two interconnected aspects of regional economic systems — their economic efficiency and environmental impact. The analysis focuses on the regions of the Ural Federal District and explores these regions’ transition to sustainable development by looking at their eco-intensity. Methodologically, the study relies on the methods of analysis and synthesis, statistical, comparative and causal analysis. Conceptually, we use the theoretical framework of sustainable development as a point of departure for our discussion. The results have shown, on the one hand, a decrease in the industrial pressure on the natural environment, related primarily to the enhanced resource efficiency of certain industries. On the other hand, less effort is now invested into minimising the negative impact on the environment in Ural regions. We have also identified those areas of sustainable development that hold most promise in the Russian context. Our findings can serve as a basis for the strategies of regional sustainable development and may be used for further research on socio-environmental and economic sustainability.

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Fiscal Policy and Ecological Sustainability: A Post-Keynesian Perspective

Cited by 34 publications

References 62 publications

How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis

How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis

Low‐carbon transition risks for finance

Greening of Regional Economic Systems Within the Framework of Sustainable Development Goals

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