Third-quarter GDP growth in Germany was negative following the sharp slump in production as car makers adapted to new emission tests. While this episode appears to be short-lived, it illustrates the impact that regulation can have on activity and asset values. Third, undervaluation of risks in new green financial products could lead to price bubbles.
I call this channel the Ponzi risk of green finance.14 We never know exactly where – but the next bitcoin mania is always lurking somewhere around the corner. Experience has taught us that you can only properly identify an asset price bubble once it has burst.