CLE Seminar: Roberta Terranova

Friday, 19 September 2025, 12 p.m., Room 210 – Via Necchi 5

Roberta TERRANOVA – CMCC

Low-carbon transition expectations and policy uncertainty:

an experimental approach

(Co-authored with Emanuele Campiglio, Maria Alejandra Erazo, Francesco Lamperti)

Abstract: This study investigates the effects of climate policy uncertainty and political polarisation on expectations concerning the transition to a low-carbon economy. In a learning-to-forecast experiment, subjects forecast carbon taxes over various planning horizons. The incentivised forecasts are then fed into a dynamic macroeconomic model that provides an estimate for investment decisions and generates carbon tax realisations for each period. We implement experimental treatments that vary the magnitude of shocks to the government’s commitment to climate mitigation action. Our findings reveal that larger shocks to government’s commitment lead to overreactions in expectations, significantly affecting the trajectory of the low-carbon transition.