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If you care about the macroeconomics of climate transition, check it out:

📄 “Forward guidance in climate policy”
By Riccardo Degasperi, Filippo Natoli, Valerio Nispi Landi, and Kevin Pallara

🧾 tinyurl.com/68jsub5j
🌱💸📉

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Methodologically, we:
✔️ Extend Känzig (2023)’s EU ETS event dataset
✔️ Use surprises in carbon and critical metals futures
✔️ Identify shocks via Proxy-SVARs and sign restrictions
✔️ Run Structural Scenario Analyses
✔️ Validate using a structural DSGE

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This tells us that 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗽𝗼𝗹𝗶𝗰𝘆 𝗳𝗼𝗿𝘄𝗮𝗿𝗱 𝗴𝘂𝗶𝗱𝗮𝗻𝗰𝗲
🏦 Can be an important policy tool
🌍 It affects macro outcomes and expectations
🌱 It can accelerate the transition

✅…without causing inflation

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𝗞𝗲𝘆 𝗳𝗶𝗻𝗱𝗶𝗻𝗴 𝟯
Path shocks affect climate-related expectations:
♻️ Investors rebalance toward greener assets
🛡️ Perceived climate risks fall
📉 Growth and consumption expectations fall
📈 Financial uncertainty rises

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𝗞𝗲𝘆 𝗳𝗶𝗻𝗱𝗶𝗻𝗴 𝟮
🏦 Monetary policy eases after a path shock.
✅ No trade-off, as inflation and output both fall.

In a structural counterfactual with no monetary easing,
➡️ emissions drop 3x more
➡️ output and prices drop 2x more

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We back this up with an environmental DSGE model featuring:
🏭 green vs brown firms
💸 carbon taxes
🏦 monetary policy

The model reproduces the same inflation dynamics:
🔹 Stance shock = cost-push shock
🔹 Path shock = demand shock

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Why is a path shock deflationary?
🔻 Households expect lower future income
➡️ reduce consumption today 🧺
📉 Aggregate demand falls more than supply
➡️ Inflation declines

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Think of path shocks as 𝗳𝗼𝗿𝘄𝗮𝗿𝗱 𝗴𝘂𝗶𝗱𝗮𝗻𝗰𝗲 on climate policy.

𝗞𝗲𝘆 𝗳𝗶𝗻𝗱𝗶𝗻𝗴 𝟭
🔹 Both shocks reduce emissions and output
🔹 But they have opposite effects on inflation:
  ⚠️ Current stance → inflationary (cost-push)
  🌱 Path shock → deflationary (demand-driven)

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We exploit high-frequency surprises in carbon futures, critical minerals, and stock prices around announcements in the EU ETS

Our goal: disentangle
✅ “Current stance” shocks: changes in current carbon policy
✅ “Path” shocks: changes in future trajectory of carbon policy