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

Vai alla versione italiana Site Search

by Ivan Faiella, Luciano Lavecchia, Valentina Michelangeli and Alessandro MistrettaOctober 2021

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