No. 639 - A micro-founded climate stress test on the financial vulnerability of Italian households and firms

Questioni di Economia e Finanza (Occasional papers)
by Ivan Faiella, Luciano Lavecchia, Valentina Michelangeli and Alessandro Mistretta
October 2021
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This study presents a novel methodological framework for assessing the exposure of the Italian financial system to climate policy risks, using a micro-founded approach.

We estimate the energy demand elasticity of Italian households and firms at the micro-level and we use this information to simulate the effects of four one-off carbon taxes (corresponding to €50, €100, €200 and €800 per ton of CO2) on their income and profits. According to our results, a level of carbon taxation within the range of €50-200 per ton does not have a sizeable effect on the share of financially vulnerable agents. The financial risks stemming from climate shocks are limited overall and specific to individual households and industries.

Published in: Journal of Policy Modeling, v. 44, 2, pp. 396-417

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  1. 12 October 2021
    No. 639 - A micro-founded climate stress test on the financial vulnerability of Italian households and firms
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