Climate-Related Stress Testing: Transition Risks in Norway

Author/Editor:

Pierpaolo Grippa ; Samuel Mann

Publication Date:

November 8, 2020

Electronic Access:

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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:

Frequency:

regular

English

Publication Date:

November 8, 2020

ISBN/ISSN:

9781513559674/1018-5941

Stock No:

WPIEA2020232

Format:

Paper

Pages:

38

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