Financial destabilisation feedback on the Earth system

There are various pathways through which financial destabilisation and tipping would feed back on the Earth system. Governments will likely try to stabilise financial markets through bailing-out policy such as providing fresh capital and saving insolvent banks and it is predicted that climate change will likely increase the frequency of bailouts (Lamperti et al., 2019). Recent government bailouts in response to COVID-19 have shown a distinct lack of sustainability focus (Rockström et al., 2023). Bailouts negatively affect the public budget and lead to increasing government debts, leaving decreasing resources for addressing Earth system destabilisation, for instance through effective climate change mitigation measures. Financial destabilisation would also deplete businesses and individuals of resources to invest in post-carbon transition.

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