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The role of emission disclosure for the low-carbon transition

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  • Frankovic, Ivan
  • Kolb, Benedikt

Abstract

We show 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. The underestimation of emissions from fossil energy firms (imperfect disclosure) provides them with too much funding. While improving disclosure in isolation has limited effects, it proves most beneficial in connection with higher carbon taxes: Improving disclosure by 20 percentage points reduces GDP costs of a carbon tax by 13%. For a carbon tax increase of 50 euro/ton CO2, this implies an average GDP benefit of 47 bn euro over six years.

Suggested Citation

  • Frankovic, Ivan & Kolb, Benedikt, 2023. "The role of emission disclosure for the low-carbon transition," Discussion Papers 33/2023, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:282981
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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:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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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