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 straining P\&C insurers' financial stability. State-level guaranty funds are designed to protect consumers facing insolvent insurers, yet their structure and effectiveness remain understudied. Unlike the pre-funded and centralized FDIC, these guaranty funds are state-run and rely on ex-post, risk-insensitive assessments of surviving insurers. While guaranty funds are intended to increase trust in the insurance system, in practice payouts can take years to reach homeowners, leaving them with unrepaired homes as they wait for claims to be paid. Crucially, we find that their structure significantly distorts insurance supply: solvent insurers exit states following insolvencies to avoid these ``tax" assessments and to escape inheriting concentrated exposures in affected counties. Furthermore, the post-funding mechanism degrades supply quality: fragile insurers, ignoring their own insolvency costs, underprice better-capitalized rivals for fully covered policies. Other explanations of exit, such as general industry-wide declines or climate risk management do not explain these exit and pricing patterns, though they can amplify the effects of the guaranty fund. These findings highlight how the current guaranty fund design induces moral hazard and amplifies pro-cyclical supply disruptions.
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.
