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How Future Beliefs Shackle Today’s Climate Policy
A new analysis in the Journal of Political Economy explores the critical tension between long-term economic expectations and short-term policy action. The research argues that when firms and households hold entrenched beliefs about the distant future—such as expectations of continued fossil fuel reliance or delayed climate regulation—it creates a powerful constraint on the effectiveness of immediate policy interventions designed to shift the economy toward sustainability.
Why it might matter to you:
For professionals in climate finance, this work highlights a fundamental barrier to deploying capital effectively: if market expectations are misaligned with policy goals, even well-designed financial instruments may fail to catalyze change. It suggests that successful green finance strategies may require parallel efforts to actively reshape long-term market narratives, making expectation management a core component of investment and policy risk assessment.
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