Flooded House or Underwater Mortgage? The Implications of Rising Climate Risk and Adaptation on Housing, Income, and Wealth 

Tinbergen Institute Discussion Paper TI 2023-014/IV, (available on SSRN).

Best Student Paper Award, CEPR European Conference on Household Finance (2023)

Best Single-Authored Paper Award, European Sustainable Finance PhD Workshop (2023)

I study the implications of climate change and adaptation on housing, income, and wealth. I embed climate change in a redistributive growth model by introducing exposure of households and firms to extreme weather events, which damage their housing capital and physical capital, respectively. The analysis reveals that climate change is intrinsically redistributive. Low-income workers experience a relatively larger decline in income as climate-related damages reduce their productivity disproportionately. At the same time, the rate at which households with positive savings accumulate wealth rises. Importantly, I show that low-income households who are financially constrained have weaker incentives to adapt to climate change and their failure to reduce vulnerability to climatic impacts exacerbates wealth inequality. While houses exposed to climate risk face a price discount in the market, I demonstrate that the materialization of climate change risk increases house prices as habitat becomes reduced. This general equilibrium effect induces low-income households to allocate a larger fraction of their budget to housing as climatic impacts intensify, translating into a widening of the adaptation gap over time. 

Presentations:  8th HEC Paris Finance PhD Workshop  ·  Massachusetts Institute of Technology Sustainable Urbanization Lab Research Seminar (virtual)  ·  13th MoFiR Workshop on Banking (PhD session)  ·  European Banking Authority Research Seminar (virtual)  ·  NY Fed & NYU Summer Climate Finance Conference (poster)  ·  Imperial College Business School Formal PhD Seminar  ·  CEPR Paris Symposium (poster)  ·  De Nederlandsche Bank Research Seminar  ·  Norges Bank Woman in Central Banking Research Workshop  ·  9th IWH-Fin-Fire Workshop on Challenges to Financial Stability   ·  CEPR European Conference on Household Finance  ·  12th Portuguese Financial Network Conference  ·  1st European Sustainable Finance PhD Workshop  ·  39th Conference of the French Finance Association (PhD workshop)  ·  1st VU Finance PhD Workshop  ·  IPWSD 2023 at Columbia University in the City of New York · Seminars on Environmental Economics and Management of Sustainability  ·  University van Amsterdam Macro and International Economics Seminar  ·  University van Amsterdam PhD Seminar  ·  Nederlandse Economendag  ·  University van Amsterdam Finance Seminar.

Covered in: VoxTalks Economics  ·  Economisch en Statistische Berichten (in Dutch).

Funding the Fittest? Pricing Climate Transition Risk in the Corporate Bond Market 

with M.A. Boermans & M.J.G. Bun

DNB Working Paper No. 797 (available on SSRN).

We study whether climate transition risk is priced in corporate bond markets. We assess whether corporate bond investors value companies' efforts to mitigate climate change by innovating in the green space. By combining global firm-level data on greenhouse emissions and green patents with confidential bond-level holdings data, we provide evidence of a positive transition risk premium, which is significantly lower for emission intensive companies that engage in green innovation. The combined effect of emission intensity and green innovation on yield spreads is driven by European investors, specifically institutional investors. Overall, our results indicate that investors care about whether companies are `fit' for the green transition. 

Presentations: 7th Annual GRASFI Conference   ·  ESCB Research Cluster Climate Change webinar series*  ·  2024 RCEA International Conference, Brunel University London*  ·  Robeco Research Seminar Series  ·  University of Utrecht School of Economics External Seminar*  ·  De Nederlandsche Bank Research Seminar  ·  Imperial College Business School  Informal PhD Seminar  ·  University van Amsterdam Finance Seminar.

Covered in: SUERF Policy Brief 882  ·  E-Axes Forum Research Digest.

Political Economy of Climate Change Adaptation

with E.C. Perotti & F. Van der Ploeg. 

CEPR Discussion Paper DP18959  , CESifo Working Paper No. 10961, Tinbergen Institute Discussion Paper TI 2024-013/IV,  (available on SSRN).

We study the evolution of voter support for public adaptation in the face of rising climate risk and growing economic inequality. Households differ in age, income, and beliefs regarding the efficacy of public adaptation. Economic polarization tightens credit constraints for more households, while rising climate risk increases the desire for climate adaptation. Provided that beliefs are not too dispersed, the winning coalition shifts in response to the growth in habitat loss. This induces a political tipping point from a coalition of young and old pessimists towards one of young pessimists and old optimists with higher public adaptation. A steady rise in inequality may induce a second political tipping point, towards a coalition of the low-income old and young pessimists, leading to less public adaptation. Thus, economic inequality has a significant impact on the political feasibility of climate policy. In general, public intervention is undermined by pessimism about the efficacy of public adaptation and the "tragedy of the horizon" effect, as voters only partially internalize benefits for future generations. This prevents public adaptation from catching up with the long-term social optimum, even when political support is highest. 

Presentations: SURED 2024  ·  Seminars on Environmental Economics and Management of Sustainability  ·  Dutch Environmental and Resource Economics Day  ·  CEPR Paris Symposium.

Covered in: VoxEU.

Home Improvements, Wealth Inequality and the Energy-Efficiency Paradox

with M.Droës.

Tinbergen Institute Discussion Paper TI 2024-026/IV,  (available on SSRN).

This article examines the rate at which different households become green and how this affects the distribution of both wealth and CO2 benefits. Using a unique dataset from the Netherlands, we find that lower-income households are less likely to make their homes more energy efficient. At the same time, higher-income households sort themselves into homes that are already more energy efficient to begin with. Over a 15-year horizon, the combined effect on energy savings accumulates to 17% of median net wealth, with ex ante sorting explaining 65% of this effect. Although a policy that encourages lower-income households to own energy-efficient homes potentially reduces wealth inequality and poverty, it leaves 83% of the potential CO2 benefits unrealized because the brownest households are in the upper part of the income distribution. Our results indicate that there is a policy trade-off between sheltering low-income households against climate risk on the one hand and effectively reducing CO2 emissions on the other.   

Presentations: AREUEA-ASSA Annual Conference 2025, San Francisco  ·  De Nederlandsche Bank Research Seminar  ·  30th ERES Annual Conference*  ·  AREUEA International Conference  ·  Royal Dutch Economic Association (KVS) New Paper Session  ·  Dutch Ministry of the Interior and Kingdom Relations (BZK)*  ·  Dutch Ministry of Economic Affairs and Climate Policy (EZK)

* presentation by co-author.

Header: Financial District, London. Photographed from Tower Bridge. January, 2024.