A1229
Title: Carbon pricing, forecasting and Covid-19: A GVAR analysis
Authors: Alexandros Konstantopoulos - University of Klagenfurt (Austria) [presenting]
Martin Wagner - University of Klagenfurt and Institute for Advanced Studies, Vienna (Austria)
Christian Zwatz - University of Klagenfurt (Austria)
Abstract: Global climate change exerts increasingly negative impacts on economies around the globe. By far, the most important anthropogenic driver of climate change are emissions of carbon dioxide $(\text{CO}_2)$, primarily emanating from burning fossil fuels (coal, gas, and oil) for energy production. Strategies to reduce such emissions are various carbon pricing schemes such as carbon taxation or emissions trading systems (ETS). However, these approaches might lead to significant carbon leakage, i.e., the relocation of emissions sources across world regions or countries due to changing relative prices of carbon emissions, as well as negatively impacting various key macroeconomic indicators. The purpose is to perform a multi-country GVAR analysis, including real GDP, unemployment rate, $(\text{CO}_2)$ emissions, and the CPI deflator, as well as a carefully constructed country-specific (proxy) carbon price index. Since the sample includes periods of (potential) structural change in the error term, such as the Covid-19 period, the GVAR model is further modified, allowing for heteroskedastic errors. In addition to the GVAR analysis, a detailed forecast evaluation of the GVAR model is performed and benchmarked against country-specific VAR and VARX models, as well as univariate time series forecasts.
