Optimal Climate Finance – How can and should finance help economies decarbonize?

Name of applicant

Julien Daubanes


Associate Professor


Technical University of Denmark


DKK 4,997,266



Type of grant

Semper Ardens: Accelerate


“Climate finance” aims to reduce CO2 emissions by reallocating capital from high- to low-carbon activities. Governments are increasingly adopting this approach, e.g., the EU’s recent taxonomy. This project will provide governments and concerned investors with new tools to devise a green financial strategy and to evaluate how well financial markets align with climate targets.


Climate finance entails potentially strong economic inefficiencies. Under some conditions, it may even be counterproductive, leading polluting sectors to pollute more. Despite this concern and the rise of climate finance in practice, no study exists on how we should allocate capital across sectors to help an economy decarbonize effectively.


To fill this research gap, the project proposes a comprehensive plan, combining state-of-the-art analytical and empirical techniques from environmental and financial economics, including the adaptation of a widely recognized economic model of climate policy assessment. It will also involve an international network of climate policy experts.

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