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The role of emission disclosure for the low-carbon transition

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  • Frankovic, Ivan
  • Kolb, Benedikt

Abstract

We quantify the importance of emission disclosure for climate policies in a DSGE model for the euro area. A low-carbon energy and a fossil energy sector contribute to production and are financed by balance-sheet constrained intermediaries. We show that imperfect information on emissions by households (savers) is sufficient to create a palpable role for disclosure improvements. The underestimation of emissions from fossil energy firms (imperfect disclosure) provides these firms with too much funding. While improving disclosure in isolation has limited effects, it provides clear benefits in connection with higher carbon taxes: For a carbon tax increase by 50 euro/ton CO2, improving disclosure by 20 percentage points reduces the GDP costs by up to 14%. Over six years, this implies GDP benefits of 47 bn euro.

Suggested Citation

  • Frankovic, Ivan & Kolb, Benedikt, 2024. "The role of emission disclosure for the low-carbon transition," European Economic Review, Elsevier, vol. 167(C).
    • Handle: RePEc:eee:eecrev:v:167:y:2024:i:c:s0014292124001211
    DOI: 10.1016/j.euroecorev.2024.104792
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    1. Frankovic, Ivan & Etzel, Tobias & Falter, Alexander & Gross, Christian & Ohls, Jana & Strobel, Lena & Wilke, Hannes, 2023. "Climate transition risk stress test for the German financial system," Technical Papers 04/2023, Deutsche Bundesbank.

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    More about this item

    Keywords

    Emission disclosure; Climate-related disclosure; Climate policy; Carbon taxation; E-DSGE; Financial frictions;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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