Transition Risk: Sources and Policy Responses / Stefano Carattini, Garth Heutel, Givi Melkadze, Inès Mourelon.

Format:

Book

Author/Creator:

Carattini, Stefano.

Contributor:

Heutel, Garth.

Melkadze, Givi.

Mourelon, Inès.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w33275.

NBER working paper series no. w33275

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

Transition risk - the financial stability risk related with decarbonization - is a major source of concern. The literature has so far only studied transition risk caused by carbon tax shocks. This paper explores other potential sources of transition risk: two other policy sources - subsidies to abatement or to green producers - and two preference-based sources - a shock to consumer preferences and a shock to investor preferences. We develop an environmental dynamic stochastic general equilibrium model that includes a frictional financial sector, and we consider macroprudential policy responses to transition risks. These different shocks have different effects on the possibility of transition risk and lead to different macroprudential policy implications.

Notes:

December 2024.

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