Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 25, 2023 erstellt
Description:
We study how the introduction of carbon taxes in a closed economy propagate in a credit portfolio and precisely describe how carbon taxes dynamics affect the firm value and credit risk measures such as probability of default, expected and unexpected losses.We adapt a stochastic multisectoral model to take into account carbon taxes on both sectoral firms' production and sectoral household's consumption. Carbon taxes are calibrated on carbon prices, provided by the NGFS transition scenarios, as well as on sectoral households' consumption and firms' production, together with their related greenhouse gases emissions. For each sector, this yields the sensitivity of firms' production and households' consumption to carbon taxes and the relationships between sectors. Our model allows us to analyze the short-term effects of carbon taxes as opposed to standard Integrated Assessment Models (such as REMIND), which are not only deterministic but also only capture long-term trends of climate transition policy.Finally, we use a Discounted Cash Flows methodology to compute firms' values which we then use in the Merton model to describe how the introduction of carbon taxes impacts credit risk measures. We obtain that the introduction of carbon taxes distorts the distribution of the firm’s value, increases banking fees charged to clients (materialized by the level of provisions computed from the expected loss), and reduces banks' profitability (translated by the value of the economic capital calculated from the unexpected loss). In addition, the randomness introduced in our model provides extra flexibility to take into account uncertainties on productivity and on the different transition scenarios by sector. We also compute the sensitivities of the credit risk measures with respect to changes in the carbon taxes, yielding further criteria for a more accurate assessment of climate transition risk in a credit portfolio.This work provides a preliminary methodology to calculate the evolution of credit risk measures of a multisectoral credit portfolio, starting from a given climate transition scenario described by carbon taxes