Welcome to my website!
I am an Economist in the Finance team of the World Bank Development Research Group.
My research focuses on corporate finance, sustainable finance, and energy markets.
email: fzeni@worldbank.org
Working papers
Climate Regulation and Emissions Abatement: Theory and Evidence from Firms’ Disclosures, with T. Ramadorai, Management Science (forthcoming)
We construct measures of firms’ beliefs about climate regulation, plans for future abatement, and current emissions mitigation from responses to the Carbon Disclosure Project. These measures vary in a pronounced, distinctive fashion around the Paris announcement. A dynamic model of a representative firm exposed to a future carbon levy, trading-off mitigation against capital growth, facing convex abatement adjustment costs does not fit the data; but a two-firm model with cross-firm information asymmetry and reputational externalities does. Out-of-sample, the model predicts reversals following the US exit from the Paris agreement. We conclude that abatement is strongly affected by firms’ beliefs about climate regulation, and cross-firm interactions amplify the impact of regulation.
Reducing Carbon Using Regulatory and Financial Markets Tools, with F. Allen and A. Barbalau
EFA Best Conference Paper 2023
We study the conditions under which debt securities that make the cost of debt contingent on the issuer’s carbon emissions, similar to sustainability-linked loans and bonds, can be equivalent to a carbon tax. We propose a model in which standard and environmentally-oriented entrepreneurs can adopt polluting and non-polluting technologies, with the latter being less profitable than the former. A carbon tax can correct the laissez-faire economy in which the polluting technology is adopted by standard entrepreneurs, but requires sufficient political support. Carbon-contingent securities provide an alternative price incentive for standard entrepreneurs to adopt the non-polluting technology, but require sufficient funds to fully substitute the regulatory tool. Absent political support for the tax, carbon-contingent securities can only improve welfare, but the same is not true when some support for a carbon tax exists.
The Optimal Design of Green Securities, with A. Barbalau
We study firms’ incentives to finance green projects using action-based debt contracts that specify ex-ante the projects financed using the proceeds, or outcome-based debt contracts that embed contingencies which incentivize commitment to outcomes without imposing restrictions on the use of proceeds. Absent frictions, outcome-based contracts such as sustainability-linked bonds achieve the first-best but if firms can manipulate green outcomes, action-based contracts such as green bonds become optimal. We show that the two co-exist in equilibrium, and high-type firms issue actions-based contracts when investors are imperfectly informed about firms’ abilities to manipulate vs exert action. We verify the model predictions empirically.
Risk Premium in the Era of Shale Oil, with F. Ferriani, F. Natoli, and G. Veronese
The boom in the production of shale oil in the United States has triggered a structural transformation of the oil market. We show, both theoretically and empirically, that this process has significant consequences for oil risk premium. We construct a model based on shale producers interacting with financial speculators in the futures market. Compared to conventional oil, shale oil technology is more flexible, but producers have higher risk aversion and face additional costs due to their reliance on external finance. Our model helps to explain the observed pattern of aggregate hedging by US oil companies in the last decade. The empirical analysis shows that the hedging pressure of shale producers has become more important than that of conventional producers in explaining the oil futures risk premium.
Policy Papers
Costs and benefits of the green transition envisaged in the Italian NRRP – an evaluation using the Social Cost of Carbon, with M. Alpino and L. Citino, Energy Policy (forthcoming)
Evaluating the Impact of a Green Credit Line: Evidence from Brazil, with C. Piza and M. Bruhn
The effects of climate change on the Italian economy. A research project of the Bank of Italy, with M. Alpino, L. Citino, and G. De Blasio
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