AMRO Cafe Seminar:  Transition Finance, Sustainable Taxonomy, and Climate Policy: A Three-Sector Environmental DSGE Framework for the Philippines

Join us for the August edition of the AMRO Cafe Seminar, featuring the paper “Transition Finance, Sustainable Taxonomy, and Climate Policy: A Three-Sector Environmental DSGE Framework for the Philippines,” by Prof. Lawrence Dacuycuy, Dr. Laura Britt-Fermo, and Dr. Jongrim Ha.

This paper develops a simple taxonomy-consistent environmental dynamic stochastic general equilibrium (E-DSGE) framework for the Philippines. Building on models of climate policy with financial frictions, the paper replaces the binary Green–Brown structure with a three-sector classification: Green, Amber, and Red. The key analytical contribution is the inclusion of the Amber sector, which is initially emissions intensive but has a credible pathway to reduce emissions intensity when transition finance and technology adoption are targeted to decarbonization. The model imposes a government budget constraint, uses an Amber-sector emissions-intensity function, distinguishes abatement effort from emissions, and represents the banking block as a fixed-share financial accelerator.

The paper shows how sustainable finance taxonomies can be embedded into macro-financial climate modeling and identifies the conditions under which transition finance lowers emissions without creating fiscal or financial accounting inconsistencies. The main implication is that Amber-sector support is transition-consistent only when it is explicitly linked to technology adoption or other measurable reductions in emissions intensity; otherwise, transition finance may expand output in an emissions-intensive sector without delivering environmental gains. The reported exercises are implemented as first-order impulse responses to a common carbon-tax innovation, so the paper interprets differences across scenarios as consequences of alternative fiscal-recycling rules rather than as forecasts or welfare rankings.

By invitation only.

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