Climate-Related Stress Testing: Transition Risks in Norway

Pierpaolo Grippa and Samuel Mann

No 2020/232, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Climate change; transition risk; carbon emissions; carbon price; environmental policy; asset pricing; financial stability; WP; balance sheet approach; emissions data; low-carbon economy; enterprise value; Carbon tax; Oil sector; Oil; gas and mining taxes; Oil prices; Greenhouse gas emissions; Global (search for similar items in EconPapers)
Pages: 38
Date: 2020-11-08
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (8)

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