Abstract: Climate disasters threaten intergenerational equity by exposing future generations to rising risks. We develop a model in which a government learns about disaster risk and enforces a sustainability criterion requiring expected social welfare to be non-decreasing over time. This criterion—similar to the principle underlying the UN Sustainable Development Goals—can be decentralized through state-contingent fiscal instruments: when perceived disaster risk is high, the constraint binds and government raises a consumption tax to finance investment subsidies for resilience. Such a fiscal rule leads to intergenerational-welfare smoothing and improves asset valuations despite adverse climate news due to commitments to future resilience. Compared with a government that adopts a social discount rate lower than households’, the sustainability-constraint rule responds to disaster risk and is better aligned with observed consumption-based climate-resilience taxes, such as those implemented in Greece and Spain.
Discussant: Christian Opp, University of Rochester
Abstract: Growing climate risk is placing increasing strain on property insurers’ balance sheets, raising concerns about insurer solvency. Insurance guaranty funds protect policyholders by covering the unpaid claims of insolvent insurers, paid for by other surviving firms in the same state. We use a range of identification approaches and datasets to show that guaranty fund assessments incentivize well-capitalized solvent insurers to ration supply in states experiencing insurer insolvencies, due to three motives: diversification, minimizing assessment size, and delaying the timing of contributions. Alternative explanations, such as changing climate risk perceptions or demand shocks, do not account for these exit and rationing patterns, although they may amplify the effects of guaranty fund exposure. Overall, our findings indicate that the current design of guaranty funds undermines the quality and quantity of insurance supply.
Discussant: Emily Gallagher, University of Colorado-Boulder
Abstract: Stricter foreign climate regulations prompt U.S. multinationals to repatriate greenhouse gas and toxic emissions, reversing the classic pollution‑haven pattern. Firms headquartered in Democratic leaning states redirect this pollution to plants in Republican leaning states. At the same time, managers greenwash by downplaying overseas climate risks during earnings calls. Well-intentioned sustainable lenders and financial analysts inadvertently reinforce both reshoring and greenwashing. The resulting domestic pollution degrades air quality and raises respiratory disease rates, underscoring the public‑health costs of fragmented climate policy.
