Research On Climate Transition Risk Measurement Of City Commercial Banks Based On The Impact Of Carbon Tax Policy

Since the Industrial Revolution,global temperatures have been rising,leading to significant changes in the climate system.Climate change can cause frequent occurrence of extreme weather events such as heat waves,storms,and floods in the short term,and can lead to environmental issues such as sea level rise and ocean acidification in the long term.Climate change will impact the real economy from both supply and demand,thereby affecting the stability of the financial system.Currently,major economies in the world have incorporated the risks posed by climate change into macro prudential regulation and are committed to transforming to a green and low-carbon economy.In 2020,the People’s Bank of China published its No.3 working paper,"Climate related financial risks-an analysis based on the functions of the central bank",pointing out that climate related risks are prone to trigger structural changes in the financial system,which can have an impact on the stability of the financial system,and need to be highly valued by financial regulatory authorities.Financial institutions should incorporate climate related financial risks into their risk management framework to improve their management capabilities for climate related risks.In 2021,the People’s Bank of China organized a climate risk stress test for 23 banks,mainly large state-owned commercial banks and joint-stock commercial banks.The test results showed that the capital adequacy ratios of the banks participating in the test could meet regulatory requirements under the pressure scenario of carbon emission payment.Compared to large state-owned commercial banks and joint-stock commercial banks,urban commercial banks are more vulnerable to climate related risks due to their low core capital ratio,high debt concentration,inadequate management systems,and incomplete information disclosure.Therefore,in the context of the task of preventing systemic financial risks,studying the climate related financial risks faced by urban commercial banks will have more practical significance.Based on the list of carbon dioxide emissions calculated by CEADS,this article obtains the industry with the highest carbon emissions in China through consolidation.It selects CS Bank,a city commercial bank with the highest credit ratio for high-carbon industries and listed in A-shares,as the research object.Under the scenario of introducing carbon tax policy shocks,it uses the method of climate risk stress testing to measure the climate transformation risks faced by CS Bank,and proposes corresponding risk prevention suggestions,Providing reference for other urban commercial banks to address and manage climate transformation risks is of great significance for avoiding systemic risks,even financial crises,caused by climate transformation risks in commercial banks.This article takes CS Bank as an example to measure and analyze its climate transition risks based on the scenario of carbon tax policy shocks.Firstly,summarize and summarize theoretical research on carbon taxes,carbon pricing,and climate related risks at home and abroad,and analyze areas where existing research needs to be improved and innovated.Secondly,review and sort out relevant materials of CS Bank,analyze its business situation and current situation of climate transformation risk management.Then,analyze the reasons why CS Bank is facing climate transformation risks,and conduct a climate transformation risk stress test based on the impact of carbon tax policies on CS Bank.Through the test analysis,the following conclusions are drawn:The production and supply industries of electricity,gas,and water are the high carbon industries most affected by the impact of carbon tax policies,and the calculated carbon tax impact coefficient and debt loss coefficient are the largest;The loan market value loss and equity market value loss of CS banks will increase as the carbon tax price increases.The total market value loss under the emergency carbon tax scenario is higher than that under the mild carbon tax scenario,and the total market value loss without pricing transfer is higher than that with market pricing transfer;When comparing the stress test results with regulatory requirements,the capital adequacy of CS Bank meets regulatory requirements,and the overall risk is within a controllable range.Finally,propose risk prevention suggestions for CS banks to address and manage climate transformation risks,such as improving their awareness and ability of climate risk management,improving their risk management framework,and promoting the development of green finance industry,in order to promote the stable operation of banks.