RicERCatori in Evidenza - Studying the economic consequences of a world without fossil fuels
The rapid transition to a low-carbon society is a goal to be pursued, but it could also trigger macroeconomic and financial disruptions. What can be done in this area to achieve a smooth transition? Emanuele Campiglio, the contact person for the ERC SMOOTH project, tells us about it.
What are the contents and goals of this research project?
The aim of the SMOOTH project is to study the macro-financial implications of the transition to a low-carbon world, i.e. a world that makes less and less use of fossil fuels.
What are the elements that make this research particularly innovative in terms of content and/or method?
We have undertaken several innovative lines of research on the subject. The main focus areas are: the role of expectations and popular beliefs in defining the sustainability of investment choices in uncertain contexts; the exposure of production networks to the costs of transitioning to other, non-fossil energy sources; and the policies and institutions required for a rapid and orderly transition, with a particular focus on the role of central banks.
We have also helped to develop new approaches of macroeconomic theoretical models and created the largest existing database of all central banks’ outward communications, to study how they deal with environmental and climate change issues in their press releases.
What societal challenge does the project respond to? What do you see as the benefits or impacts on society? Can you give us some concrete examples?
The challenge is clear and urgent: to mitigate climate change through a complex reconversion of production. Modern human society has developed thanks to fossil fuels, and now we must suddenly learn to do without them. How can we finance the necessary investments, and what could be the socio-economic repercussions of a rapid transition? What policies can we put in place to combine environmental and economic sustainability? The SMOOTH project hopes to help provide answers to these questions.
When you heard that the project had won ERC funding, how did you feel? What does this recognition mean for your research path?
I felt euphoric and empowered. It is a great opportunity to contribute to the advancement of research and develop new ideas. The ERC funding enabled me to obtain a permanent position in an excellent department and university, and to build an international research team. I also extended my project to the RFF-CMCC European Institute on Economics and the Environment.
When did your research project start and how far has it come? What results have you achieved so far?
SMOOTH is at the start of its third year of five. We have initiated several lines of research, and the first products are about to be released, having been extensively presented at seminars and conferences. We plan to continue along the same lines and to develop some new ones, for example including behavioural experiments, also thanks to funding from the Italian Ministry of Universities and Research (FARE2020).
RicERCatori in Evidenza is the column dedicated to the University of Bologna's cutting-edge research funded by the European Research Council-ERC and its protagonists.