Extreme precipitation events have become more frequent and severe in recent years, leading to devastating natural disasters around the world. This paper investigates the impacts of extreme rainfall on corporate leverage dynamics. We find that the increase of extreme precipitation brings about a significant drop in firm’s leverage. The channel tests show that extreme rainfall would generate the recession of firm’s balance sheet and thus tighten the financing constraints, inducing firm to cut down leverage. On the other hand, intense rainfall would depress the land price and heighten local government’s debt risk, which crowds out the credit resources allocated to private sector, contributing to the deleveraging of firms. Simulations from the new Keynesian DSGE model with extreme rainfall shock and local government land finance system, lend further support to our empirical findings. Furthermore, our model shows that the welfare cost of extreme rainfall risk can amount to 2.2% of the agent’s lifetime utility. Lower welfare cost can be achieved by accommodating monetary policy and active fiscal policy.

This study explores the heterogeneous and asymmetric macro-financial effects of weather-related shocks in Central, Eastern and Southeastern European countries, depending on the level of underlying macro-financial vulnerabilities. Focusing solely on acute physical risks – those arising from extreme weather events – it employs panel quantile regression analysis to examine data from 2000Q1–2022Q4 for 17 countries in the region. Notably, we find that weather shocks – particularly droughts, floods, heatwaves and wildfires – exacerbate macroeconomic and financial imbalances, increasing the susceptibility of already vulnerable economies to additional risks. Specifically, countries with higher economic imbalances suffer more severe output disruptions and heightened inflationary pressures following a weather shock. While the immediate impact of climate shocks on external imbalances is limited, countries with existing vulnerabilities may still encounter longer-term pressures on trade and investment patterns. Additionally, extreme weather events can intensify financial vulnerabilities for countries that are already grappling with lower levels of financial resilience.

We describe the main insights from the papers included in this special issue, Challenges for the Development of Latin America in the Anthropocene: Current Research in Environmental Economics. The contributions are organized around three themes: the economic and welfare impacts of temperature variability, the role of institutions and user rights in shaping environmental governance and the effectiveness of regulatory instruments for managing ambient and atmospheric pollution. Together, these papers show that environmental outcomes in Latin America are deeply shaped by institutional capacity, governance quality and social inequality. By combining rigorous empirical analysis with attention to local contexts, they demonstrate how environmental economics can inform policy responses to the triple planetary crisis of climate change, biodiversity loss and pollution.

This paper presents a macroeconomic framework for carbon markets. We set up a global climate-economy with carbon-intensive energy inputs, renewable energy, natural carbon sinks, and a carbon capture technology to show that (i) within a comprehensive carbon pricing system, a carbon tax alone implements any given path of carbon emissions; (ii) ‘additionality’ is not a property of the optimal carbon pricing system; and (iii) without a carbon tax, renewable subsidies, preservation of carbon sinks and a price for carbon capture are needed.

To enhance the supervision of regional environmental issues, China initiated a nationwide campaign in 2007 to establish environmental courts and formulate local environmental regulations. This study selected Shanghai and Shenzhen A-share listed companies from 2004 to 2021 as its research sample to examine the impact of local environmental legislation and the establishment of environmental courts on corporate carbon emissions. The findings indicate that the combined effect of these measures significantly curbs carbon emissions. Additionally, the study identifies that the intensity of local environmental court establishment and the implementation of corporate pollution charges or environmental protection taxes are critical mechanisms through which environmental legislation and court establishment reduce corporate carbon emissions. Finally, the interaction of environmental legislation and court establishment on corporate carbon emissions is most pronounced in regions where the government exhibits lower environmental concern, in state-owned enterprises, in enterprises located in the eastern region and in highly polluted cities.

Using novel nighttime lights and high-resolution atmospheric reanalysis, this paper exploits exogenous fluctuations in temperature and precipitation to identify the causal effects of weather disturbances on local economic growth in the Philippines – the world’s most disaster-prone country. Our findings reveal that heightened temperature variability significantly dampens growth, but only in poor municipalities. This effect persists for at least 2 years after the initial shock. Furthermore, the relationship between weather shocks and growth is nonlinear. We also demonstrate that adverse weather events impede growth by disrupting agricultural productivity and essential service sectors, including wholesale and retail trade, health and education. Overall, our results highlight the importance of understanding the distributional impact of climate change within countries, its underlying mechanisms, and how economic development policies can help shield poor municipalities from the vagaries of the weather.

Understanding how households adapt to hurricanes is increasingly important as these events become more frequent and severe. This paper examines how past hurricane exposure influences current household preparedness, focusing specifically on the stockpiling of bottled water. Leveraging scanner data on bottled water purchases for households in the Southeastern United States, we employ a difference-in-differences event study framework to analyze how repeated hurricane experiences affect consumer behavior. Our results indicate that households exposed to hurricane warnings do not increase their preparedness in the subsequent hurricane season, and those experiencing a landfall event underprepare. These results suggest limited learning from past events.

Will rising temperatures from climate change affect labour markets? This paper examines the impact of temperature on hours worked, using panel data from Peru covering the period from 2007 to 2015. We combine information on hours worked from household surveys with weather reanalysis data. Our findings show that high temperatures reduce hours worked, with the effect concentrated in informal jobs rather than in weather-exposed industries. These results suggest that labour market segmentation may shape how climate change affects labour outcomes in developing countries.

While previous scientific literature has found evidence that warming winters result in a loss of crop yields, recent studies suggest that temperature alone may not be the sole factor in determining yields. In this study, we investigate multiple climatic factors (freezing degree days (FDD) and snow cover fraction) to evaluate the heterogeneous impact of snowpack insulation on winter wheat yields in China. We find that a unit increase in FDD causes a loss of 2.37 kg/hectare in winter wheat yields. Furthermore, our results show that snowpack insulation has a statistically significant negative effect on winter wheat yields at lower and middle quantiles, but a statistically significant positive effect at higher quantiles of the winter wheat yields distribution, suggesting that snowpack insulation is important in maintaining higher winter wheat yields.

Using a dynamic computable general equilibrium model that differentiates cropping activities and labour by sex and includes household home production, this study examines the effects of rainfall variability in Burkina Faso from both a macroeconomic perspective and a gender lens. The simulation of the annual rainfall pattern observed in the country over the past decade highlights its broad economic effects and confirms the greater sensitivity of female-led cropping activities. It also underscores the differential impacts on female and male workers in the labour market and within households, revealing the interactions between the non-market and market spheres of the economy when a rainfall shock occurs. Nevertheless, additional simulations suggest that promoting water management systems or more water-stress-resistant crop varieties could help mitigate the effects of rainfall variability and that targeted measures to support female farmers could effectively reduce their specific vulnerability.

An increasing number of disaster relief programs rely on weather data to trigger automated payouts. However, several factors can meaningfully affect payouts, including the choice of data set, its spatial resolution, and the historical reference period used to determine abnormal conditions to be indemnified. We investigate these issues for a subsidized rainfall-based insurance program in the U.S. using data averaged over 0.25° × 0.25° grids to trigger payouts. We simulate the program using 5x finer spatial resolution precipitation estimates and evaluate differences in payouts from the current design. Our analysis across the highest enrolling state (Texas) from 2012 to 2023 reveals that payout determinations would differ in 13% of cases, with payout amounts ranging from 46 to 83% of those calculated using the original data. This potentially reduces payouts by tens of millions annually, assuming unchanged premiums. We then discuss likely factors contributing to payout differences, including intra-grid variation, reference periods used, and varying precipitation distributions. Finally, to address basis risk concerns, we propose ways to use these results to identify where mismatches may lurk, in turn informing strategic sampling campaigns or alternative designs that could enhance the value of insurance and protect producers from downside risks of poor weather conditions.

Climate change increasingly threatens human development, economic resilience and labour market stability. Using panel data from Chinese A-share listed firms (2007–2021), this study quantifies the employment impacts of extreme temperatures. A one-standard-deviation increase in exposure reduces employment by 0.07 per cent, equivalent to an average loss of 0.0054 workers per firm and 4.36 jobs across the sample. Extreme heat has a stronger effect than cold, with temperature bin analysis showing an average loss of 0.191 workers per firm and 15.565 jobs overall. Mechanism analyses indicate that extreme temperatures heighten operational risks and financial constraints, reducing labour demand. Internal and external buffers are identified: higher wages mitigate employment losses, government subsidies provide external support, while robot adoption and supply chain concentration show limited moderating effects. Heterogeneity analyses reveal greater vulnerabilities in underdeveloped, resource-dependent and climate-sensitive regions. Results emphasize the need for climate-adaptive policies to protect employment amid rising environmental risks.

This article analyzes the influence of hurricane strikes on the returns of sovereign bonds issued by Cuba, the Dominican Republic and Haiti between 1905 and 1930. The study uses a fixed effects regression model to isolate the impact of hurricane-induced destruction on bond returns, providing a deeper understanding of market reactions following natural disasters. The article shows that hurricanes during this period, which have the potential to cause significant damage, increase bond returns by an average of 0.9 percent in the same month. This suggests that investors demand a risk premium on sovereign bonds from hurricane-prone regions due to the direct impact and broader economic consequences of these disasters.

Environmental outcomes can be shaped by underlying politics. This study investigates whether pre-determined election timings affect these outcomes by combining electoral data with remote sensing data on crop burning, forest fires, slash-and-burn activity, and tree cover for 28 major states (covering approximately 3800 assembly constituencies) in India from 2008 to 2019. Analysing 71 elections during this period reveals evidence of the presence of electoral cycles in environmental outcomes, with non-election years experiencing higher levels of environmentally harmful activities compared to election years. These cycles are more pronounced when the incumbent’s party wins without a supermajority in state elections. The study further shows that specific factors, such as high-yield crop varieties, poverty levels, and Scheduled Tribe population proportions, also shape these environmental outcomes across the electoral cycle.

While a growing body of literature studies the effects of weather shocks on economic activity in low-income countries, relatively little is known about their impact on cross-border capital flows. This study investigates whether weather shocks, specifically deviations in precipitation and temperature from their long-term averages, trigger capital flight from Africa. Exploiting the variation in within-country exposure to weather shocks, we find that temperature shocks lead to increased capital outflows and trade misinvoicing. The long-run relationship between temperature and capital flight is conditional upon country-specific factors, such as reliance on oil exports, institutional frameworks and financial infrastructures. Our findings reveal a moderate role of state capacity in the relationship between weather shocks and capital flight, highlighting the need for further investigation into other potential mechanisms.

Climate change can have significant consequences on the world economy, a possibility explored in this paper. We simulate the world economy using data from 20 economies spanning from 1999 to 2023 in a Global Vector Autoregression (GVAR) framework. Our hypothesis posits that temperature anomaly shocks impact economies through financial markets, which then transmit the shock to production. We model financial markets using four key indicators: currency markets, stock markets, short-term credit markets, and long-term credit markets. Our findings reveal that temperature anomaly shocks: i) trigger a global recession, ii) induce fluctuations across all financial markets, iii) lead to depreciation of domestic currencies, declines in stock markets, and decreases in long-term interest rates, and iv) elicit a minor response in short-term interest rates. These results highlight the presence of spillover effects from temperature anomalies. We validated our findings using alternative configurations (time-varying and fixed bilateral trade), with the main conclusions remaining consistent. Our study suggests that financial markets, particularly the stock market, serve as transmission channels for the consequences of climate change.

Excessive car ownership in cities has led to issues including congestion, air pollution and resource consumption. This paper investigates the impact of rail transit openings on automobile purchases in China based on detailed car sales data during 2013–2015 and using two-way fixed effects panel models. Our study reveals an average decrease of 2.27 per cent in car sales due to rail transit openings. Further analyses of cars with different fuel economy reveal stronger effects on fuel-efficient cars, indicating larger substitution elasticity between public transportation and driving for people with less income. Results also show the negative impact of rail transit openings is larger in cities with more developed economies, higher public revenue, larger population, bigger area and fewer buses. The decline in car sales translates into savings of 7.9 billion liters of gasoline and a reduction of about 20.3 million tons in life-cycle carbon emissions.

Climate change can lead to increased pest migration and more frequent outbreaks by altering pest life cycles and habitats. Farmers facing increased temperatures or rainfall resort to more pesticides, emphasizing the need for adaptive pest management. This article evaluates the economic benefits of farmer networks for pest management by applying an economic model of social learning to a pilot network in Iowa. Our results show significant variation in the network’s effectiveness. We find that networks are particularly valuable for farmers facing high pest infestation risks, offering over $300 per acre in value against the impacts of extreme heat.1

Wine is the most differentiated of all farm products, with much of the differentiation based on the location of production. In this paper, we estimate the effects of climate and vintage weather on California's varietal wine quality and prices. Our analysis is based on a sample of premium wines rated by Wine Spectator magazine between 1994 and 2022 and a comparable sample of secondary market auction prices from K&L Wine Merchants, each matched to spatially detailed weather data from PRISM. We find that extreme temperatures, particularly extremely hot temperatures, caused prices to decline. Absent additional adaptation, climate change will harm wine quality and disrupt quality signals from geographical indications in California's premier wine regions.

The social organisation of productive and reproductive labour leaves women disproportionately vulnerable to climatic changes and extreme weather events. In the Indian context, this could further reduce women’s labour force participation rates from levels that are already relatively low. Employment opportunities for women in the clean energy sector have been noted to create transformative changes in their lives only with policies such as government intervention to provide accessible public services. Towards this end, I propose a gendered and green job guarantee programme directed towards education, health, public transport (or universal basic services), climate mitigation, and climate adaptation activities.

The intersections between gendered livelihoods and the climate crisis, as well as the gendered and environmental implications of the existing rural employment guarantee in India, are reviewed. Gender-disaggregated employment creation through the proposed job guarantee programme and the budgetary implications are estimated, along with suggestions for potential sources of financing. The programme is estimated to result in the creation of 36 million guaranteed jobs, which accounts for 6% of the workforce as of 2023. Of these jobs, women’s employment opportunities constitute 11.6 million. The number of guaranteed jobs created for women accounts for 4% of the rural female workforce and 11.6% of the urban female workforce. Thus, a gendered and green job guarantee programme in India could be an effective form of government intervention to address the interlinked issues of women’s work and climate action in India.