Economic Memos provide insight into the analysis work being performed by Danmarks Nationalbank’s employees. For example, Economic Memos contain background analyses and method descriptions. Economic Memos are primarily targeted at people who already have a knowledge of economic and financial analyses.
New methodology for assessing economic and financial risks of the green transition
A global green transition is necessary to maintain a robust Danish economy with price and financial stability in the long term. However, this transition could have a knock-on effect on the economy and the financial sector. Danmarks Nationalbank has mapped the risks arising from the green transition and is currently assessing the economic and financial consequences. Its assessments are based on a newly developed methodology described in this memo.
Key messages
Why is it important?
Climate change and a green transition of society could challenge Danmarks Nationalbank’s objectives of price and financial stability. Hence it is important for Danmarks Nationalbank to analyse how and how much climate change and different green transition scenarios could affect the economy and the financial system.
Main chart
Danish banks and mortgage credit institutions will increase impairment charges on the value of their total corporate lending to a limited extent in a scenario where there are no technical emission reductions and additional CO2e tax.
Note:
Accumulated impairments on loans to non-financial corporations in Denmark. The accumulated impairment in 2023 are based on Danmarks Nationalbank’s Credit Register, while trends in the period 2024-2035 are estimated based on the selected scenario.
Source:
Model calculations in GreenREFORM, Credit Register, accounting database and own calculations.