Embedding Finance in the Macroeconomics of Climate Change: Research Challenges and Opportunities Ahead
ifo Institute, Munich, 2020
CESifo Forum 21 (4), 25-32
![](https://cesifo.org/DocImg/CESifo-forum-2020-4-monasterolo-Embedding-Finance-in-the-Macroeconomics-of-Climate-Change-november%20.jpg?c=1689236904)
The role of finance in the low-carbon transition, as well as the deep uncertainty and endogeneity of climate finance risk, are currently neglected by climate economic models. This leads to a false sense of control in terms of risks and opportunities associated with the low-carbon transition. Further, it prevents people from understanding under which conditions climate policies and finance could be a driver or a barrier. Recent research has started to shed light on how climate economic and financial risk modeling could embrace this complexity.