Climate-Related Stress Testing: Transition Risks in Norway

November 8, 2020

Preview Citation

Format: Chicago

Pierpaolo Grippa, and Samuel Mann. Climate-Related Stress Testing: Transition Risks in Norway, (USA: International Monetary Fund, 2020) accessed November 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper explores three possible transmission channels for transition risk shocks to the financial system in Norway. First, we estimate the direct firm-level impact of a substantial increase in domestic carbon prices under severe assumptions. Second, we map the impact of a drastic increase in global carbon prices on the domestic economy via the Norwegian oil sector. Third, we model the impact of a forced reduction in Norwegian oil firms’ output on shareholder portfolios. Results show that such a sharp increase in carbon prices would have a significant but manageable impact on banks. Finally, the paper discusses ways to advance the still evolving field of transition risk stress testing.

Subject: Carbon tax, Economic sectors, Environment, Greenhouse gas emissions, Oil prices, Oil sector, Oil, gas and mining taxes, Prices, Taxes

Keywords: Asset pricing, Balance sheet approach, Carbon emissions, Carbon price, Carbon tax, Climate change, Emissions data, Enterprise value, Environmental policy, Financial stability, Gas and mining taxes, Global, Greenhouse gas emissions, Low-carbon economy, Oil, Oil prices, Oil sector, Transition risk, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/232
Stock No:

WPIEA2020232
ISBN:

9781513559674
ISSN:

1018-5941

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