It is widely recognised by scholars and practitioners that mitigating greenhouse gas emissions and achieving the goals of the Paris Agreement requires introduction of climate policies. However, there is a debate on types of climate policies that needed to be introduced, as well as on timing of these policies (“early-and-gradual” vs “too-late-too-sudden” implementation of the climate policies). In order to shed the light on these questions, researchers from the Dept. of Banking and Finance of the Univ. of Zurich and Vienna University develop a novel approach to climate policy evaluation based on multilayer financial-real economy networks. Results suggest that during climate policy evaluation process it is crucial to take into account not only climate policy’s effect on the economic sector it is aimed at (e.g. effect of “carbon tax” on non-financial firms), but also its indirect effect on other financial and real economy sectors (through multiple reinforcing positive feedback loops among them), as this indirect effect can be substantial. Also, results highlight that “too-late-too-sudden” implementation of climate policies may lead to systematic mispricing of climate-related assets, therefore, contributing to systemic risk, while in the case of “early-and-gradual” implementation of the climate policies, market players are able to smoothly adjust their expectations on prices as the policies phase-in allowing a smooth transition to a low-carbon economy.

The article has been published in the scientific journal “Ecological Economics” on Friday April 6th 2018.

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Publication authors:

Veronika Stolbova1, Irene Monasterolo2, Stefano Battiston1


  1. FINEXUS Center for Financial Networks and Sustainability, Department of Banking and Finance, University of Zurich, Switzerland.
  2. Vienna University of Economics and Business, Austria.

Funding: The work was funded by the of the EU grants FET project DOLFINS (grant no. 640772), and EU H2020 project ISIGrowth (grant no. 649186).