Climate-Related Stress Testing: Transition Risks in Norway
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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.
Series:
Working Paper No. 2020/232
Subject:
Carbon tax Economic sectors Environment Greenhouse gas emissions Oil prices Oil sector Oil, gas and mining taxes Prices Taxes
Frequency:
regular
English
Publication Date:
November 8, 2020
ISBN/ISSN:
9781513559674/1018-5941
Stock No:
WPIEA2020232
Pages:
38
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