Veranstaltung
14
NOV 2022

14:00 - 15:30
IWH Research Seminar

Too Levered for Pigou? A Model of Environmental and Financial Regulation

We analyze jointly optimal emissions taxes and financial regulation in a model with financial frictions and endogenous climate-related transition and physical risks.

Wer
Magdalena Rola-Janicka  (Tilburg University)
Wo
via Zoom
Magdalena Rola-Janicka

Zur Person

Magdalena Rola-Janicka is an Assistant Professor in Finance at Tilburg University. Her research interests are in financial intermediation, macro-finance and political economy.

We analyze jointly optimal emissions taxes and financial regulation in a model with financial frictions and endogenous climate-related transition and physical risks. The socially optimal emissions tax is below the Pigouvian benchmark (equal to the direct social cost of emissions) when emissions taxes amplify financial constraints, or above the Pigouvian benchmark if physical climate risks have a substantial impact on collateral values. With emissions taxes optimally set to account for this collateral externality, additionally introducing leverage regulation can be welfare-improving if tax rebates are not fully pledgeable. In this case, optimal financial regulation mandates a leverage cap or floor, depending on whether higher leverage is associated with more or less emissions.

To join the lecture via ZOOM, please contact Melina Ludolph.

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