Should we fear transition risks - A review of the applied literature
Louis Daumas ()
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Louis Daumas: CIRED - Ecole des Ponts ParisTech
No 2021.05, Working Papers from FAERE - French Association of Environmental and Resource Economists
The transition to a low-carbon economy will entail sweeping transformations of energy and economic systems. To such an extent that a growing literature has been worrying about the effect of such strain on the stability of financial system. This "financial transition risk" literature has highlighted that the conjunction of climate policy, technological change and changing consumption patterns may propagate to financial markets. If too brutal or unexpected, such dynamics may result in a "Climate-Minsky" moment of systemic implications. Yet, recent historical developments have shown that financial markets can prove resilient to shocks onto transition-exposed industries such as fossil fuel producers. Should we thus fear transition risks? To answer this question, I propose a critical review of the relevant applied modelling and econometric literatures. Three sub-fields will be examined: the asset stranding literature, the financial econometrics of the low-carbon transition and the direct assessment of transition risks through prospective models. I will expound some key results of these literatures, and critically assess underlying methodologies.
Keywords: Review; Stranded Assets; Financial Stability (search for similar items in EconPapers)
JEL-codes: G01 Q50 (search for similar items in EconPapers)
Pages: 68 pages
New Economics Papers: this item is included in nep-cwa, nep-ene and nep-fdg
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Forthcoming in Non
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http://faere.fr/pub/WorkingPapers/Daumas_FAERE_WP2021.05.pdf First version, 2021 (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2021.05
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