Strategy

As long as coal plants are still operating, it is a good idea to require them capture their carbon dioxide emissions. But those designing policies to hasten such practices must tread carefully, lest they unwittingly extend the life of dirtier energy sources.

NEW YORK – Climate change is no longer a future problem. It is here, and the effects are all around. Worse, today’s extreme weather events are just a preview of the pain that awaits humanity in the coming decades, almost regardless of how fast we manage to decarbonize the economy this year or next.

There is a consensus that global value chains have aided developing countries' growth. This essay highlights the governance complexities arising from participating in such chains, drawing from lessons we have learned conducting research in the coffee and garment supply chains. Market power of international buyers can lead to inefficiently low wages, prices, quality standards, and poor working conditions. At the same time, some degree of market power might be needed to sustain long-term supply relationships that are beneficial in a world with incomplete contracts.

In the landscape of low carbon sources of energy, nuclear power stands out as an option that has generated increasing attention and capital investment. Since 2001, nuclear energy production has been in decline, though Clean Core Thorium Energy, led by Mehul Shah, is one of the companies that is bringing nuclear back to the forefront. Founded in 2017, Clean Core is a nascent player in an industry that has a poor reputation among investors.

Should an incumbent metal manufacturing company make the change to green steel and how should it address its business model to be successful in its move to carbon neutrality?

Modifying attitudes and behaviours related to climate change is difficult. Attempts to offer information, appeal to values and norms or enact policies have shown limited success. Here we examine whether participation in a climate prediction market can shift attitudes by having the market act as a non-partisan adjudicator and by prompting participants to put their ‘money where their mouth is’.

How can we measure the extent to which data-intensive firms are using their market power? Economists typically look to markups as evidence of market power. Using a simple model with firms that price risk in their capital allocation and production decisions, we highlight the competing forces that make markups an unreliable measure of data-derived market power. Instead, we show how markups measured at different levels of aggregation reflect data and distinguish data from other intangible investments.

We develop a novel technique to extract credit-relevant information from the text of quarterly earnings calls. This information is not spanned by fundamental or market variables and forecasts future credit spread changes. One reason for such forecastability is that our text-based measure predicts future credit spread risk and firm profitability. More firm- and call-level complexity increase the forecasting power of our measure for spread changes. Out-of-sample portfolio tests show the information in our measure is valuable for investors.

Speeding up the adoption of already proven and scalable technologies, and exposing the many hidden costs associated with fossil fuels, is a necessary goal. Achieving it will require new policies to guide investments in the right direction, and techno-optimists ought to be the loudest advocates.