Abstract:

The slow adoption of climate change policies stems from concerns about their economic impact. The EU has led global carbon pricing through its Emissions Trading Scheme (ETS). This study examines the effect of ETS policy shocks on global stock market returns at the country-industry level using linear and spatial autoregression models. Results show that while markets react negatively to rising carbon prices, the impact is small in magnitude. Global spillovers are limited to sectors linked to EU industries via intermediate goods trade, with no significant effects beyond these supply chain linkages. Overall, the unintended consequences of EU climate policies appear negligible, with minimal effects on targeted industries’ stock returns and no spillovers outside supply chain linkages.

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Short bio: 

Galina Hale is a Professor of Economics and Faculty Director at the Institute for Social Transformation, UC Santa Cruz. She previously served as a Research Advisor at the Federal Reserve Bank of San Francisco and as an assistant professor of economics at Yale University.  Galina’s current research interests focus on attracting mainstream finance to climate solutions, the sustainability of the global food system, and international financial stability, especially with respect to climate risks.  Galina has published in leading economics and finance peer-reviewed journals. She serves on multiple editorial boards and presents her work regularly at scholarly and policy meetings worldwide.