Climate change will have a significant impact on the financial system, and it is crucial to evaluate the impact of climate risk on the financial system. In view of this, this paper evaluates the impact of climate transition risks on the financial system from the perspective of carbon tax. Based on the micro data of bank and enterprise loans, this paper uses a bottom-up approach to study the systemic risk of the banking sector caused by the carbon tax. Based on the actual data of China's banking sector in 2017, we find that there is an exponential relationship between the carbon tax and systemic risk, and there is a threshold for both the whole banking sector and different types of banks. When the carbon tax is higher than the threshold, systemic risk will increase significantly with the increase of the carbon tax level. At the same time, the results show that the systemic risk caused by the carbon tax has obvious sector heterogeneity and regional heterogeneity. Therefore, in the process of implementing carbon tax policies, the differences between sectors and regions should be taken into account, so as to effectively prevent and control systemic risks in the banking sector while improving the efficiency of carbon tax policies.
Keywords: Carbon tax; Climate policy; Systemic risk; Transition risk.
© 2022. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.