Climate change and public debt: contingent debt instruments as a possible solution against climate-related shocks

Climate change is becoming a more and more serious problem over the last years. In addition to the consequences on the planet and human beings, also the global economy will suffer always more. This work analyses the several transmission channels between climate change and economy highlighting differences among countries with distinct characteristics in term of geography and economic structure. Can sovereign’s public finance intervene through debt management to try to stabilize its own economic situation and sovereign risk? State-contingent debt instruments, such as GDP-linked bonds, can be possible tools to be included in the sovereign debt portfolio by governments in order to cope with climate events and the associated macroeconomic shocks.