Abstract

ABSTRACT This paper aims to identify the most emission-intensive industries in the Czech economy using an environmentally extended input-output framework to determine whether decarbonization of the economy might jeopardize financial system stability. The main contribution of this paper to the existing literature lies in connecting bank industry-specific loan exposures with industry-specific emission intensities, which are used to calculate potential credit losses after the introduction of a carbon tax. The analysis shows that the Czech banking sector is not significantly concentrated in industries which are most vulnerable to decarbonization of the economy and threats to the financial stability of the green transition are currently low.

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