02470cas a2200325 a 4500 AALejournalIMF022157 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513599205 1018-5941 BD-DhAAL BD-DhAAL Sever, Can. Climate-Related Stress Testing : Transition Risk in Colombia / Can Sever, Manuel Perez-Archila. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (40 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper builds a framework to quantify the financial stability implications of climate-related transition risk in Colombia. We explore risks imposed on the banking system based on scenarios of an increase in the domestic carbon tax by using bank- and firm-level data. Focusing on the deterioration of firms' balance sheets and the exposure of banks to different sectors, we assess the extent to which such policy shock would transmit from nonfinancial firms to the banking system. We observe that sectors are affected unevenly by a higher carbon tax. Agriculture, manufacturing, electricity, wholesale and retail trade, and transportation sectors appear to be the most important in the transmission of the risk to the banking system. Results also suggest that a large increase in the carbon tax can generate significant but likely manageable financial stability risks, and that a gradual increase in the carbon tax to meet a higher target over several years could be preferable in terms of financial risks. A gradual increase would also have the benefit of allowing for a smoother adjustment to higher carbon tax for stakeholders. Mode of access: Internet Banks imf Depository Institutions imf Financial Risk and Risk Management imf Financing Policy imf Micro Finance Institutions imf Mortgages imf Perez-Archila, Manuel. IMF Working Papers; Working Paper ; No. 2021/261 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/261/001.2021.issue-261-en.xml IMF e-Library