Macro-Financial Transition Risks in the Fight Against Global Warming
21 Pages Posted: 8 Jun 2021 Last revised: 23 Jun 2021
Date Written: June 1, 2021
The macro-financial transition risks that result from disorderly transitions to a carbon-free or low-carbon economy may entail significant costs due to the risk of stranded assets, defaults, collapse in stock market value, both for financial firms and non-financial firms. The effects of networks, contagion, and higher-round effects of stranding may exacerbate the problem. But green monetary and prudential policy and governance reforms may mitigate the problem. The qualitative, empirical, modelling, policy and institutional research on this topic is surveyed and various avenues for future research are identified.
Keywords: low-carbon transition; transition risks; stranded assets; carbon premium; green financial policies; central banks
JEL Classification: E44, Q43, Q58
Suggested Citation: Suggested Citation