# Macroeconomic Consequences and Implications of Decarbonization

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Friday, April 29, 2022

##  Third Annual Volatility and Risk Institute Conference

Macroeconomic Consequences and Implications of Decarbonization

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The Volatility and Risk Institute held its Third Annual Conference virtually on Friday, April 29, 2022. The topic for the conference was "Macroeconomic Consequences and Implications of Decarbonization."

### **Conference Program**

9:00am - 9:30am: **Introduction and Welcome** ([Video](https://youtu.be/QqsrxrM-aqg))

[Robert Engle](https://www.stern.nyu.edu/faculty/bio/robert-engle), *Co-Director, Volatility and Risk Institute at NYU Stern* - What’s New at the VRI?
[Richard Berner](https://www.stern.nyu.edu/faculty/bio/richard-berner), *Co-Director, Volatility and Risk Institute at NYU Stern -* VRI Research Plans for 2022

9:30am - 10:00am: **Fireside Chat** with [Sheldon Whitehouse](https://www.whitehouse.senate.gov/), *United States Senator* ([Video](https://youtu.be/qR9ZhcEimwc))
[Richard Berner](https://www.stern.nyu.edu/faculty/bio/richard-berner), *Co-Director, Volatility and Risk Institute at NYU Stern (Moderator)*

**Session I: Macroeconomics of Decarbonization** ([Video](https://youtu.be/o7JLH9oDzwI))

10:00am - 11:20am
[Glenn Rudebusch](https://glennrudebusch.com/), *Visiting Research Professor,* *Volatility and Risk Institute at NYU Stern* (Moderator)
[Jean Pisani-Ferry](https://www.piie.com/experts/senior-research-staff/jean-pisani-ferry), *Senior Fellow, PIIE and Bruegel - "*Climate Policy is Macroeconomic Policy, and the Implications Will Be Significant"
[Warwick J. McKibbin](https://crawford.anu.edu.au/people/academic/warwick-mckibbin), *Professor and Director, Centre for Applied Macroeconomic Analysis, Australian National University; non-Resident Senior Fellow, Brookings Institution -* “Climate Change and Monetary Policy: Issues for Policy Design and Modelling”
[Elga Bartsch](https://www.blackrock.com/corporate/biographies/elga-bartsch), *Managing Director, Head of Macro Research, BlackRock* (Discussion)

11:20am - 11:30am: Break

**Session II: Net Zero Transitions** ([Video](https://youtu.be/eordgUPTh4o))

11:30am - 12:40pm:
[Jinu Koola](https://www.stern.nyu.edu/sites/default/files/assets/documents/Bio%20-%20Jinu%20Koola.pdf), *Head of ESG Analytics, Norges Bank Investment Management* (Moderator)
[Patrick Bolton](https://www8.gsb.columbia.edu/cbs-directory/detail/pb2208), *Barbara and David Zalaznick Professor of Business, Columbia Business School* and [Marcin T. Kacperczyk](http://www.kacperczyk.net/index.html), *Professor of Finance, Imperial College London* - "Global Pricing of Carbon-Transition Risk and Firm Commitments"
[Olivier Wang](https://www.stern.nyu.edu/faculty/bio/olivier-wang), *Assistant Professor of Finance, NYU Stern -* "Incentives to Decarbonize and Innovate: the Role of Net-Zero Commitments" (co-authored with Viral Acharya and Robert Engle)
[Sir Dieter Helm](http://www.dieterhelm.co.uk/home/about/), *Professor of Economic Policy, University of Oxford; Fellow in Economics, New College, Oxford* (Discussion)
[Günther Thallinger](https://www.allianz.com/en/about-us/corporate-management/board-of-management/members.html#thallinger), *Member of the Board of Management, Allianz SE* (Discussion)

12:40pm -12:50pm: Break

**Lunch Talks**

12:50pm – 1:20pm
[Mindy Lubber](https://www.ceres.org/about-us/staff/lubber), *Chief Executive Officer and President, Ceres* ([Video](https://youtu.be/Zp19GwoO6o0))
**Dapeng Hu**, *Managing Director,* *BlackRock* ([Video](https://youtu.be/NcjRbFz1LF0))

**Session III: Macro Consequences of Carbon Pricing** ([Video](https://youtu.be/lU_4TKJVwW4))

1:20pm - 2:00pm
[Diego Kaenzig](https://www.diegokaenzig.com/)*, London Business School - "*The Unequal Economic Consequences of Carbon Pricing"
[Johannes Stroebel](http://pages.stern.nyu.edu/~jstroebe/index.html), *David S. Loeb Professor of Finance, Professor of Finance, NYU Stern* (Discussion)

2:00pm – 2:10pm Break

**Session IV: State of the Carbon Offset Market** ([Video](https://youtu.be/M8ijr-BaWXw))

2:10pm - 3:10pm: Panel
[Jo Paisley](https://www.garp.org/garp-risk-institute/jo-paisley), *President, GARP Risk Institute* (Moderator)
[Eron Bloomgarden](https://www.climatefinancepartners.com/eron-bloomgarden), *Founding Partner,* *Climate Finance Partners; Founder, Emergent*
[Annette Nazareth](https://www.davispolk.com/lawyers/annette-nazareth), *Co-Chair, Integrity Council for the Voluntary Carbon Markets*
[David Victor](https://gps.ucsd.edu/faculty-directory/david-victor.html), *Professor; Center for Global Transformation Endowed Chair in Innovation and Public Policy, UC San Diego*

3:10pm - 3:20pm Break

3:20pm - 3:50pm **Fireside Chat: Assessing Financial Stability and Monetary Policy in the Transition** ([Video](https://youtu.be/Ik6j1hN4S-c))
[Richard Berner](https://www.stern.nyu.edu/faculty/bio/richard-berner), *Co-Director,* *Volatility and Risk Institute at NYU Stern* (Moderator)
[Sir Paul Tucker](http://www.paultucker.me/), *Research Fellow of the Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School; author, Unelected Power; former central banker*

**Conference Theme**

The policy changes needed to make the transition from the current carbon-dependent economy to a decarbonized one will take years, be expensive, be disruptive, create winners and losers, and involve uncertain outcomes. Decarbonization will radically change the composition of output from consumption to investment, thus involving income and job losses for today’s consumers, and the loss of earnings and firm values and accelerated obsolescence of capital (stranded assets) for today’s producers. For them, it will represent an adverse supply shock in some ways like the oil price hikes in the 1970s. The more aggressive the need for action, the more these adverse consequences need to be assessed.

In this conference we hope to explore critical macroeconomic and policy issues associated with the climate transition. Among them:

First, the macro implications: The losses to some will be offset by gains to others, but the time horizons during which they occur may be substantially different. The losses may appear quickly as the decarbonization influences legacy assets and firms. Such a transformation will involve massive new infrastructure, new jobs, new technologies and new activities. Those investments will be disruptive, will require funding and involve uncertain returns, and their benefits may only show up in the future. Will these changes increase economic inequality, energy shortages, both inflation and unemployment and reduce or increase productivity?

Next, the policies: Achieving decarbonization won’t happen through market adjustments alone; it involves pricing carbon significantly higher either explicitly through taxation or implicitly through regulation. What will be the macroeconomic consequences – on output, employment, productivity and inflation -- of these strategies such as taxes, subsidies, border adjustments, emissions regulation and target date net-zero commitments? How should fiscal and monetary policies respond? What policies should help cushion the adverse effects of decarbonation on consumers and businesses? And what are the implications for financial stability?

Finally, what are the implications for capital markets and risk transfer and insurance? As companies and governments commit to net zero goals, their ability to attract capital to achieve them may depend on the credibility of those commitments. Likewise, markets for offsets and insurance will need more and better disclosure to function appropriately.