Time for a New Paradigm

The European Union decided to be climate-neutral by 2050 and, hence, become the first climate-neutral continent in the world.  Becoming climate-neutral can be considered one of the biggest challenges in our industrial societies. This transition will shape our future tremendously. The invasion of Ukraine further reinforced the necessity to speed up this transition out of geopolitical and moral considerations. Macroeconomic thinking and policies set the incentives for many other policy areas, consumers, firms and other research disciplines. It provides a framework for decisions on which investments will be carried out, which form of energy will be used in the future and how the transition will be financed. We claim it is necessary to make macroeconomics fit for a climate-neutral future. This includes considering climate-related issues in all macroeconomic decisions and discussing the appropriate policy tools to make this transition happen in an efficient and socially fair manner.  

In our first event, we discuss the role of fiscal policy in the green transition. Here, our focus will be on whether Europe needs additional public investment to achieve carbon neutrality by 2050, how additional expenditures should be financed, and whether the European Union should change its fiscal rules to facilitate the green transition. 

Our event on Green Finance will deal with the challenge that a massive reallocation of financial capital is necessary to mitigate climate change and strategically restructure the energy system. In this event, we ask and discuss what hampers this reallocation process from a financial perspective and how finance can deliver. Along these lines, we will address the crucial issues of risk and asset pricing, time horizons and information in this context. 

The third event will focus on the role of the ECB and its asset purchase program in the green transition. Guided by the market neutrality principle, the ECB purchases corporate bonds to ease the financing conditions for firms disproportionally supporting the high emission sectors in the Eurozone. This clearly contradicts the goals of net-zero by 2050. We aim to discuss the implications of the market neutrality principle, how it can be adapted to better fit the Paris objectives and the macroeconomic impact of such changes.