A0878
Title: On the credibility of the 2015 Paris agreement and effectiveness of climate policies
Authors: Susana Campos Martins - University of Oxford (United Kingdom) [presenting]
Abstract: The aim is to propose a novel approach based on financial asset returns to empirically investigate how the response of global financial markets to climate change concerns has changed over time. Leveraging a data-driven approach to select time indicators, it is found that most climate-driven global common volatility of the oil and gas industry is material only in the period post-Paris Agreement. Policies designed to reduce greenhouse gas emissions and mitigate the effects of climate change by ramping up investment in renewable energy and implementing carbon taxes and government programs that focus on the energy transition all seem to be creating turmoil in the oil and gas industry. This is contrary to green markets, where such climate policies make green asset returns less volatile, so the investments there are less risky. The contributions shed light on the credibility of international cooperation under the Paris Agreement and the effectiveness of climate policies under nationally determined contributions. By being more ambitious, transparent, and accountable, we find that the Paris Agreement appears to be sending the right signals to financial markets concerning the energy transition since its adoption. Ever since, climate concerns seem to be disrupting the oil and gas industry at an increasing rate, while green assets tend to be more stable, safer investments.
