FIN4ZERO · Removing Barriers to Firms' Investment in the Transition to Net-Zero

The transformation of European economies towards greenhouse gas neutrality (net-zero transition) will require active engagement from enterprises and companies. Firms will need to contribute a substantial share of the investment required for the green transition but currently fail to sufficiently engage. In Germany, for example, a yearly amount of 120 billion Euros of firm investment are needed to achieve the climate goals for 2045 - with actual investment meeting less than half of that in 2021. While increasingly recognized as a fundamental hurdle for reaching the EU’s climate goals, this problem is still underrepresented in academic research. This project seeks, first, to understand barriers to firms’ climate investment and their interactions and, second, to determine the best policies to remove these barriers. The methodological approach concentrates on computer-based modelling of the economy. The early climate-economy models focused on CO2 pricing as main policy instruments. A second line of research focused on developing green technologies concentrating on green innovation subsidies. This project is part of a newly emerging strand focusing on barriers for climate investment at the firm level. This project contributes to this state-of-the-art research agenda by (i) identifying different barriers to investment and their interactions in the data (concentrating on financial barriers and biased beliefs), (ii) building an economic computer-based model which satisfies the empirical findings and represents the variety of firms in great detail and (iii) performing computer-based experiments to identify the best policies for removing barriers to firms’ climate investment. For the researcher, this project will strengthen the researcher’s academic foundation as a quantitative macroeconomist with an environmental economics specialization. Like this, it substantially contributes to the successful application for assistant professor positions on the academic job market.