9,107
Views
57
CrossRef citations to date
0
Altmetric
Articles

Transition risks and market failure: a theoretical discourse on why financial models and economic agents may misprice risk related to the transition to a low-carbon economy

&
Pages 82-98 | Received 28 Jan 2016, Accepted 20 Jun 2016, Published online: 18 Jul 2016

References

  • Aghion, P., C. Hepburn, A. Teytelboym, and D. Zenghelis. 2014. “Path-dependency, Innovation and the Economics of Climate Change.” New Climate Economy Report: The Global Commission on the Economy and Climate.
  • Akerlof, George A. 1970. “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism.” Quarterly Journal of Economics 84 (3): 488–500. http://socsci2.ucsd.edu/~aronatas/project/academic/Akerlof%20on%20Lemons.pdf. doi: 10.2307/1879431
  • Alloway, Tracy. 2012. “Modelling: Normal Distribution Is Not Always the Norm.” Financial Times Online, April 13.
  • Bachelier, Louis. 1900. “La Théorie de la Speculation.” Annales scientifiques de l’E'cole Normale Superieure 3 (17): 21–86.
  • Bator, Francis M. 1958. “The Anatomy of Market Failure.” The Quarterly Journal of Economics 72 (3): 351–379. doi: 10.2307/1882231
  • Bikhchandani, Sushil, and Sunil Sharma. 2001. “Herd Behavior in Financial Markets.” IMF Staff Papers 47 (3): 279–310.
  • Bowles, S. 1985. “The Production Process in a Competitive Economy: Walrasian, Neo-Hobbesian, and Marxian Models.” American Economic Review 75: 16–36.
  • Brennan, Michael J., and Feifei Li. 2008. “Agency and Asset Pricing.” UCLA Finance Working Papers.
  • Buchanan, James, and W. M. Craig Stubblebine. 1962. “Externality.” Economica 29 (116): 371–384. doi: 10.2307/2551386
  • Caldecott, Ben, Gerard derricks, and James Mitchell. 2015. “Stranded Assets and Subcritical Coal: The Risk to Companies and Investors.” Oxford University Smith School of Enterprise and the Environment Stranded Assets Programme Working Paper.
  • Caldecott, Ben, Lucas Kruitwagen, Gerard Dericks, Daniel Tulloch, Irem Kok, and James Mitchell. 2016. “Stranded Assets and Thermal Coal: An Analysis of Environment-related Risk Exposure.” Oxford University Smith School of Enterprise and the Environment Stranded Assets Programme Report.
  • Caldecott, Ben, James Tilbury, and Christian Carey. 2014. “Stranded Assets and Scenarios.” Oxford University Smith School of Enterprise and the Environment Stranded Assets Programme Discussion Paper.
  • Carney, Mark. 2015. “Breaking the Tragedy of the Horizon – Climate Change and Financial Stability.” Speech given at Lloyd’s of London, September 29.
  • Chenet, Hugues, Jakob Thomä, and Didier Janci. 2015. “Financial Risk and the Transition to a Low-Carbon Economy: Towards a Carbon Stress-testing Framework.” 2° Investing Initiative / UNEP Inquiry Working Paper.
  • Coase, Ronald. 1937. “The Nature of the Firm.” Economica 4 (16): 386–405. doi: 10.1111/j.1468-0335.1937.tb00002.x
  • Coase, R. H. 1960. “The Problem of Social Cost.” The Journal of Law and Economics III: 1–44. doi: 10.1086/466560
  • Dahlman, Carl J. 1979. “The Problem of Externality.” Journal of Law and Economics 22 (1): 141–162. doi: 10.1086/466936
  • David, Paul. 1985. “Clio and the Economics of QWERTY.” American Economic Review 75 (2): 332–337.
  • Dupre, Stanislas, and Hugues Chenet. 2013. “Landscaping Carbon Risk for Financial Intermediaries” 2° Investing Initiative Working Paper. Accessed July 9, 2016. http://2degrees-investing.org/IMG/pdf/landscaping_carbon_risk_website.pdf.
  • Fama, Eugene. 1970. “Efficient Capital Markets: A Review of Theory and Empirical Work.” Journal of Finance 25 (2): 383–417. doi: 10.2307/2325486
  • Financial Stability Board. 2015. “Task Force on Climate-Related Financial Disclosures.”
  • Fukuyama. 1992. End of History and the Last Man. New York: First Free Press.
  • Fulton, Mark, James Leaton, Paul Spedding, Andrew Grant, Reid Capalino, Luke Sussams, and Margherita Gagliardi. 2015. “The $2 Trillion Stranded Assets Danger Zone: How Fossil Fuel Firms Risk Destroying Investor Returns.”
  • Greenwald, Bruce, and Joseph E. Stiglitz. 1986. Externalities in Economies with Imperfect Information and Incomplete Markets. Quarterly Journal of Economics 101 (2): 229–264. http://qje.oxfordjournals.org/content/101/2/229.short. doi: 10.2307/1891114
  • Haldane, Andrew, and Benjamin Nelson. 2012. “Tails of the Unexpected.” Speech given at “The Credit Crisis Five Years On: Unpacking the Crisis.” conference held at the University of Edinburgh Business School, June 8–9.
  • Hardin, Garett. 1968. “The Tragedy of the Commons.” Sciences 162 (3859): 1243–1248. doi: 10.1126/science.162.3859.1243
  • Iacurci, Jenna. 2014. “Global Warming Goal of 2 Degrees Dwindling.” Nature World News, September 22. Accessed November 11, 2015. http://www.natureworldnews.com/articles/9139/20140922/global-warming-goal-of-2-degrees-dwindling.htm.
  • Jensen, Michael C. 1978. “Some Anomalous Evidence Regarding Market Efficiency.” Journal of Financial Economics 6 (2): 95–101. doi: 10.1016/0304-405X(78)90025-9
  • Jensen, Michael C., and William H. Meckling. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics 3 (4): 305–360. doi: 10.1016/0304-405X(76)90026-X
  • Jones, Steven, and Jeffrey M. Netter. 2014. “Efficient Capital Markets.” Library of Economics and Liberty.
  • Kahnemman, Daniel, and Amos Tsversky. 1979. “Prospect Theory: An Analysis of Decision Under Risk.” Econometrica 47 (2): 263–292. doi: 10.2307/1914185
  • Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money. Cambridge: Macmillan University Press.
  • Knight, Frank. 1921. Risk, Uncertainty, and Profit. Boston, MA: Hart, Schaffner and Marx.
  • Krugman, Paul. 2009. “How Did Economists Get It so Wrong?” NY Times, September 6.
  • Kydland, F. E., and E. C. Prescott. 1977. “Rules Rather than Discretion: The Inconsistency of Optimal Plans.” Journal of Political Economy 85 (3): 473–491. doi: 10.1086/260580
  • Laibson, David. 1997. “Golden Eggs and Hyperbolic Discounting.” Quarterly Journal of Economics 112 (2): 443–478. doi: 10.1162/003355397555253
  • Lancet. 2015. “Health and Climate Change: Policy Responses to Protect Public Health.” 2015 Lancet Commission on Health and Climate Change.
  • Leaton, James. 2013. “Unburnable Carbon 2013: Wasted Capital and Stranded Assets.” Carbon Tracker Initiative report.
  • Leibenstein, Harvey. 1966. “Allocative Efficiency vs. ‘X-Efficiency’.” The American Economic Review 56 (3): 392–415.
  • Mackay, Charles. 1841. Memoirs of Extraordinary Popular Delusions and the Madness of Crowds. London: Richard Bentley. https://vantagepointtrading.com/wp-content/uploads/2010/05/Charles_Mackay-Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds.pdf.
  • Magill, Michael J. P., and Martine Quinzii. 1996. Theory of Incomplete Markets. Vol. I. Cambridge: MIT Press.
  • Markowitz, H. M. 1952. “Portfolio Selection.” Journal of Finance 7 (1): 77–91.
  • Marshall, Alfred. 1967. Principles of Economics. London: Macmillan for the Royal Economic Society.
  • McGlade, Christophe, and Paul Ekins. 2015. “The Geographical Distribution of Fossil Fuels Unused When Limiting Global Warming to 2°C.” Nature 517: 187–190. doi: 10.1038/nature14016
  • Medema, Steven. 2010. The Hesitant Hand: Taming Self-interest in the History of Economic Ideas. Princeton, NJ: Princteon University Press.
  • Meinshausen, M., N. Meinshausen, W. Hare, S. C. B. Raper, K. Frieler, R. Knutti, D. J. Frame, and M. R. Allen. 2009. “Greenhouse-gas Emission Targets for Limiting Global Warming to 2°C.” Nature 458: 1158–1162. doi: 10.1038/nature08017
  • Mercer. 2013. “Global Investor Survey on Climate Change.” 3rd Annual Report on Actions and Progress – Commissioned by the networks of the global investor coalition on climate change.
  • Mercer. 2015. “Investing in a Time of Climate Change.” Mercer report.
  • Mill, Jon Stuart. 1844. Essays on Some Unsettled Questions of Political Economy. London: Longmans, Green, Reader and Dyer.
  • Minsky, Hyman. 1992. “The Financial Instability Hypothesis.” Levy Economics Institute of Bard College Working Paper No. 74.
  • Nelson, Richard, and Sidney G. Winter. 1982. An Evolutionary Theory of Economic Change. Harvard: Harvard University Press.
  • North, Douglass. 1993. “Economic Performance through Time.” Nobel Prize Lecture 1993.
  • Novethic. 2015. “Responsible Investors Acting on Climate Change.” Novethic report.
  • Ong, Li. 2014. A Guide to IMF Stress Testing: Methods and Models. Washington, DC: International Monetary Fund.
  • Palacios-Huerta, Ignacio. 2003. “Time-inconsistent Preferences in Adam Smith and David Hume.” History of Political Economy 35 (2): 241–268. doi: 10.1215/00182702-35-2-241
  • Pidcock, Roz. 2012. “Can We Still Limit Warming to Two Degrees?” Carbon Brief, December 12.
  • PWC. 2014. “Asset Management in 2020: A Brave New World.” PWC report.
  • Robbins, Lionel. 1938. “Interpersonal Comparison of Utility: A Comment.” The Economic Journal 48 (192): 635–641. doi: 10.2307/2225051
  • Robins, Nick, Wai-Shin Chan, and Zoe Knight. 2012. “Coal and Carbon.” HSCB investor report.
  • Samuelson, Paul. 1937. “A Note on Measurement of Utility.” Review of Economic Studies 4: 155–161. doi: 10.2307/2967612
  • Samuelson, Paul. 1965. “Proof that Properly Anticipated Prices Fluctuate Randomly.” Industrial Management Review 6 (2): 41–49.
  • Savage, L. J. 1950. The Foundations of Statistics. New York: Wiley Press.
  • Sharpe, William F. 1964. “Capital Asset Prices: A Theory of Market Equilibrium under the Conditions of Risk.” The Journal of Finance 19 (3): 425–442.
  • Simon, Herbert. 1957. Models of Man: Social and Rational. New York: John Wiley and Sons.
  • Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. London: Methuen.
  • Stern, Nicholas. 2006. “What is the Economics of Climate Change?” World Economics 7 (2): 1–10.
  • Taleb, Nassim. 2007. Black Swans: The Impact of the Highly Improbable. New York: Random House Publishing Group.
  • Thaler, R. H. 1981. “Some Empirical Evidence on Dynamic Inconsistency.” Economic Letters 8 (3): 201–207. doi: 10.1016/0165-1765(81)90067-7
  • Thomä, Jakob, Stan Dupré, and Hugues Chenet. 2014. “The Turtle becomes the Hare: Short-termism in Financial Markets.” 2° Investing Initiative Working Paper.
  • Tobin, J. 1958. “Liquidity Preferences as Behavior Towards Risk.” Review of Economic Studies 25 (2): 65–86. doi: 10.2307/2296205
  • Tsversky, Amos, and Craig R. Fox. 1995. “Ambiguity Aversion and Comparative Ignorance.” The Quarterly Journal of Economics 110 (3): 585–603. doi: 10.2307/2946693
  • WEF (World Economic Forum). 2012. “Measurement, Governance and Long-Term Investing.” World Economic Forum report.