EconPapers    
Economics at your fingertips  
 

Low‐carbon transition risks for finance

Gregor Semieniuk, Emanuele Campiglio (), Jean-Francois Mercure (), Ulrich Volz and Neil R. Edwards

Wiley Interdisciplinary Reviews: Climate Change, 2021, vol. 12, issue 1

Abstract: The transition to a low‐carbon economy will entail a large‐scale structural change. Some industries will have to expand their relative economic weight, while other industries, especially those directly linked to fossil fuel production and consumption, will have to decline. Such a systemic shift may have major repercussions on the stability of financial systems, via abrupt asset revaluations, defaults on debt, and the creation of bubbles in rising industries. Studies on previous industrial transitions have shed light on the financial transition risks originating from rapidly rising “sunrise” industries. In contrast, a similar conceptual understanding of risks from declining “sunset” industries is currently lacking. We substantiate this claim with a critical review of the conceptual and historical literature, which also shows that most literature either examines structural change in the real economy, or risks to financial stability, but rarely both together. We contribute to filling this research gap by developing a consistent theoretical framework of the drivers, transmission channels, and impacts of the phase‐out of carbon‐intensive industries on the financial system and on the feedback from the financial system into the rest of the economy. We also review the state of play of policy aiming to protect the financial system from transition risks and spell out research implications. This article is categorized under: Climate Economics > Economics and Climate Change

Date: 2021
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1002/wcc.678

Related works:
Working Paper: Low-carbon transition risks for finance (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:wirecc:v:12:y:2021:i:1:n:e678

Access Statistics for this article

More articles in Wiley Interdisciplinary Reviews: Climate Change from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2021-03-28
Handle: RePEc:wly:wirecc:v:12:y:2021:i:1:n:e678