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Climate policy and transition risk in the housing market

Author

Listed:
  • Ferentinos, Konstantinos

    (Lancaster University)

  • Gibberd, Alex

    (Lancaster University)

  • Guin, Benjamin

    (Bank of England)

Abstract

Public policies aimed at mitigating climate change can come with the transition risk of sudden adjustments of asset prices. We study the consequences of a policy intervention addressing greenhouse gas emissions in the housing market. Leveraging a unique data set of the population of all house transactions in England and Wales, we document novel evidence of transition risk. Prices of carbon-intensive properties affected by this policy decreased by about £5,000 to £9,000 relative to unaffected ones. We interpret this result as evidence in favour of semi-strong market efficiency in the housing market. We infer moderate implications for financial stability and for the wealth distribution among homeowners.

Suggested Citation

  • Ferentinos, Konstantinos & Gibberd, Alex & Guin, Benjamin, 2021. "Climate policy and transition risk in the housing market," Bank of England working papers 918, Bank of England.
    • Handle: RePEc:boe:boeewp:0918
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    Cited by:

    1. Biasin, Massimo & Delle Foglie, Andrea & Giacomini, Emanuela, 2024. "Addressing climate challenges through ESG-real estate investment strategies: An asset allocation perspective," Finance Research Letters, Elsevier, vol. 63(C).
    2. Bell, Jennifer & Battisti, Giuliana & Guin, Benjamin, 2023. "The greening of lending: Evidence from banks’ pricing of energy efficiency before climate-related regulation," Economics Letters, Elsevier, vol. 230(C).

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    More about this item

    Keywords

    Climate policy; transition risk; house prices; financial stability; wealth inequality;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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