{
  "title": "Climate-Related Stress Testing: Transition Risks in Norway",
  "publication": "IMF Working Papers, November 8, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2020/11/08/climate-related-stress-testing-transition-risks-in-norway-49835",
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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.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Paper explores three transmission channels for transition risk shocks to Norway’s financial system.\n- Key conclusions:\n  - A sharp increase in carbon prices would have a significant but manageable impact on banks.\n  - The paper discusses ways to advance the still evolving field of transition risk stress testing."
    },
    {
      "heading": "Transmission channels analyzed",
      "content": "- Direct firm-level impact of a substantial increase in domestic carbon prices under severe assumptions.\n- Impact of a drastic increase in global carbon prices on the domestic economy via the Norwegian oil sector.\n- Impact of a forced reduction in Norwegian oil firms’ output on shareholder portfolios."
    },
    {
      "heading": "Methods and analytical focus",
      "content": "- Firm-level estimation of direct impacts from domestic carbon price shocks.\n- Mapping of macroeconomic transmission through the oil sector from global carbon price shocks.\n- Portfolio-level modeling of forced output reductions in Norwegian oil firms and consequent effects on shareholders."
    },
    {
      "heading": "Findings and implications for financial stability",
      "content": "- Results show that a sharp increase in carbon prices:\n  - Would have a significant impact on banks.\n  - The impact is characterized as manageable for the banking sector.\n- Emphasis on the evolving nature of transition risk stress testing and the need for methodological advances."
    },
    {
      "heading": "Policy and research recommendations",
      "content": "- Advance the field of transition risk stress testing (specific pathways and techniques discussed in the paper).\n- Incorporate firm-level, sectoral (oil sector), and portfolio channels in stress-testing frameworks to capture transition risks comprehensively.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/11/08/climate-related-stress-testing-transition-risks-in-norway-49835"
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    "Authors: Pierpaolo Grippa, Samuel Mann",
    "Published: November 8, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513559674.001",
    "Paper explores three transmission channels for transition risk shocks to Norway’s financial system.",
    "Key conclusions:",
    "Direct firm-level impact of a substantial increase in domestic carbon prices under severe assumptions.",
    "Impact of a drastic increase in global carbon prices on the domestic economy via the Norwegian oil sector.",
    "Impact of a forced reduction in Norwegian oil firms’ output on shareholder portfolios.",
    "Firm-level estimation of direct impacts from domestic carbon price shocks.",
    "Mapping of macroeconomic transmission through the oil sector from global carbon price shocks.",
    "Portfolio-level modeling of forced output reductions in Norwegian oil firms and consequent effects on shareholders.",
    "Results show that a sharp increase in carbon prices:",
    "Emphasis on the evolving nature of transition risk stress testing and the need for methodological advances.",
    "Advance the field of transition risk stress testing (specific pathways and techniques discussed in the paper).",
    "Incorporate firm-level, sectoral (oil sector), and portfolio channels in stress-testing frameworks to capture transition risks comprehensively.",
    "**Working Paper**"
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