Periodic Reporting for period 2 - SMOOTH (Sustainable finance for a smooth low-carbon transition)
Période du rapport: 2022-03-01 au 2023-08-31
The SMOOTH project studies the dynamic links between macro-financial systems and the transition to a low-carbon economy, exploring policy and institutional strategies to achieve a rapid and orderly decarbonisation.
The societal challenge is clear and urgent: mitigate climate change through a complex reconversion of the global production structure. How will we finance the necessary investments, and what could be the socio-economic repercussions of a fast transition? What policies can we implement to combine environmental and economic sustainability? The SMOOTH project wants to help provide answers to these questions.
The project is composed of three main areas of work:
1. The study of how behavioural dimensions (heterogeneous expectations, sentiments, cognitive biases) affect the carbon intensity of physical/financial investments and the overall dynamics of the low-carbon transition.
2. The analysis of the macroeconomic/financial drivers and implications of the low-carbon transition, including the identification of appropriate policy strategies.
3. The study of the institutional and political economy implications of the low-carbon transition, with a focus on central banks and financial regulators.
SMOOTH is run by an international team of researchers based at the University of Bologna and at the RFF-CMCC European Institute on Economics and the Environment.
The societal challenge is clear and urgent: mitigate climate change through a complex reconversion of the global production structure. How will we finance the necessary investments, and what could be the socio-economic repercussions of a fast transition? What policies can we implement to combine environmental and economic sustainability? The SMOOTH project wants to help provide answers to these questions.
The project is composed of three main areas of work:
1. The study of how behavioural dimensions (heterogeneous expectations, sentiments, cognitive biases) affect the carbon intensity of physical/financial investments and the overall dynamics of the low-carbon transition.
2. The analysis of the macroeconomic/financial drivers and implications of the low-carbon transition, including the identification of appropriate policy strategies.
3. The study of the institutional and political economy implications of the low-carbon transition, with a focus on central banks and financial regulators.
SMOOTH is run by an international team of researchers based at the University of Bologna and at the RFF-CMCC European Institute on Economics and the Environment.
The most significant achievements of the SMOOTH project so far have been:
- The development of innovative, interdisciplinary and policy-relevant research. Five academic articles have been published on well-ranked journals with high impact factor. Three articles have been published as working papers and are now under review in academic journals. Five additional articles are being developed and close to completion. Additional papers and projects are currently in their initial stages.
- The wide dissemination of our research through seminars, conferences and other public events, which has raised its profile (and the profile of involved researchers) in both academic and policy-maker circles. We have also made all new data and code created by the SMOOTH project available open access to favour replication and further research, including a novel (and largest ever) dataset of central bank speeches.
- The creation of a lively, diversified and collaborative team of researchers with a wide international network of collaborations, placing the group among the top European groups working in the field of climate macroeconomics and finance
- The development of innovative, interdisciplinary and policy-relevant research. Five academic articles have been published on well-ranked journals with high impact factor. Three articles have been published as working papers and are now under review in academic journals. Five additional articles are being developed and close to completion. Additional papers and projects are currently in their initial stages.
- The wide dissemination of our research through seminars, conferences and other public events, which has raised its profile (and the profile of involved researchers) in both academic and policy-maker circles. We have also made all new data and code created by the SMOOTH project available open access to favour replication and further research, including a novel (and largest ever) dataset of central bank speeches.
- The creation of a lively, diversified and collaborative team of researchers with a wide international network of collaborations, placing the group among the top European groups working in the field of climate macroeconomics and finance
All the work being developed as part of SMOOTH aims at being innovative and move beyond the state of the art. In their own sub-fields, all of SMOOTH lines of research have been offering significant achievements. In particular:
- The application of behavioural macroeconomics techniques to the study of climate change and the low-carbon transition has the potential to offer a variety of new perspectives to the field, as it is able to capture behavioural dynamic factors usually not incorporated into climate economic modelling.
- The study of propagation of mitigation policy impacts via production networks promises to shed new light on the systemic effects of the low-carbon transition, as well as on its distributional implications.
- The introduction of real-world factors related to the transition (e.g. heterogeneous financing costs, learning effects, uncertainty, asset stranding) into climate economic models will significantly improve the identification of optimal mitigation policies.
- The coupling of Integrated Assessment Models and Agent-Based macroeconomic models will be able to provide a novel view on the macro-financial implications of the low-carbon transition, accounting for economic complexity.
- Our work on the political economy of green central banking has been key in shaping the academic and policy discussion on the topic. All of the papers planned in this area will further strengthen the centrality of our contribution, shedding new light on the role of central banks and financial regulators along the transition.
- The application of behavioural macroeconomics techniques to the study of climate change and the low-carbon transition has the potential to offer a variety of new perspectives to the field, as it is able to capture behavioural dynamic factors usually not incorporated into climate economic modelling.
- The study of propagation of mitigation policy impacts via production networks promises to shed new light on the systemic effects of the low-carbon transition, as well as on its distributional implications.
- The introduction of real-world factors related to the transition (e.g. heterogeneous financing costs, learning effects, uncertainty, asset stranding) into climate economic models will significantly improve the identification of optimal mitigation policies.
- The coupling of Integrated Assessment Models and Agent-Based macroeconomic models will be able to provide a novel view on the macro-financial implications of the low-carbon transition, accounting for economic complexity.
- Our work on the political economy of green central banking has been key in shaping the academic and policy discussion on the topic. All of the papers planned in this area will further strengthen the centrality of our contribution, shedding new light on the role of central banks and financial regulators along the transition.