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Journal Article
Understanding the Linkages between Climate Change and Inequality in the United States
The authors conduct a review of the existing academic literature to outline possible links between climate change and inequality in the United States. First, researchers have shown that the impact of both physical and transition risks may be uneven across location, income, race, and age. This is driven by a region’s geography as well as its ability to adapt. Second, measures that individuals and governments take to adapt to climate change and to transition to lower emissions risk increasing inequality. Finally, while federal aid and insurance coverage can mitigate the direct impact of ...
Report
Understanding the Linkages between Climate Change and Inequality in the United States
We conduct a review of the existing academic literature to outline possible links between climate change and inequality in the United States. First, researchers have shown that the impact of both physical and transition risks may be uneven across location, income, race, and age. This is driven by a region’s geography as well as its adaptation capabilities. Second, measures that individuals and governments take to adapt to climate change and transition to lower emissions risk increasing inequality. Finally, while federal aid and insurance coverage can mitigate the direct impact of physical ...
Discussion Paper
How Do Natural Disasters Affect Small Business Owners in the Fed’s Second District?
In this post, we follow up on the previous Liberty Street Economics post in this series by studying other impacts of extreme weather on the real sector. Data from the Federal Reserve’s Small Business Credit Survey (SBCS) shed light on how small businesses in the Second District are impacted by natural disasters (such as hurricanes, floods, wildfires, droughts, and winter storms). Among our findings are that increasing shares of small business firms in the region sustain losses from natural disasters, with minority-owned firms suffering losses at a disproportionately higher rate than ...
Report
U.S. Banks’ Exposures to Climate Transition Risks
We build on the estimated sectoral effects of climate transition policies from the general equilibrium models of Jorgenson et al. (2018), Goulder and Hafstead (2018), and NGFS (2022a) to investigate U.S. banks’ exposures to transition risks. Our results show that while banks’ exposures are meaningful, they are manageable. Exposures vary by model and policy scenario with the largest estimates coming from the NGFS (2022a) disorderly transition scenario, where the average bank exposure reaches 9 percent as of 2022. Banks’ exposures increase with the stringency of a carbon tax policy but ...
Journal Article
Central Banks and Climate Risks
Some researchers look at climate change and see economic uncertainty. Central banks are beginning to take notice
Texas electrical grid remains vulnerable to extreme weather events
New regulations, weatherization standards and operational changes have addressed many shortcomings, but some critical gaps persist.
Discussion Paper
CRISK: Measuring the Climate Risk Exposure of the Financial System
A growing number of climate-related policies have been adopted globally in the past thirty years (see chart below). The risk to economic activity from changes in policies in response to climate risks, such as carbon taxes and green subsidies, is often referred to as transition risk. Transition risk can adversely affect the real economy through the banking sector. For example, a shock to borrowers’ transition risk can impair their ability to repay, which can then lead to an amplified effect on banks’ current and expected future profits, resulting in a systemic undercapitalization of banks. ...
Journal Article
How Are Businesses Responding to Climate Risk?
Understanding what kinds of climate-related risks businesses could face is part of the Federal Reserve’s work to support a thriving economy and well-functioning financial system. To advance these goals, the San Francisco Fed surveyed businesses in its nine-state region to learn how they perceive and approach climate risk. Findings show that businesses view a changing climate as a moderate risk to their activities, particularly through possible regulation changes, higher input costs, and variations in demand. Many businesses are adopting formal risk mitigation strategies, including ...
Residential solar power shines on, backed by securitized lending
Residential solar is a small and rapidly expanding sector, and the securitization market—the packaging of loans to investors—has been one of the most popular sources of funding for new solar installations.
Working Paper
The Impact of Weather on Local Government Spending
While there is a new and rapidly growing literature on the effects of climatic factors on economic and social outcomes, little research has been conducted to understand the fiscal impact of weather, especially at the sub-state level. Using data from Massachusetts municipalities from 1990 through 2019, this paper estimates government spending as a function of temperature and precipitation while controlling for municipality and year fixed effects and municipality-specific time trends. The results show that weather has statistically significant and economically meaningful effects on local ...