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Transition Risk in Emerging Economies

Author

Listed:
  • Carattini, Stefano
  • Kim, Giseong
  • Melkadze, Givi
  • Pommeret, Aude

Abstract

Many emerging economies tend to rely considerably on carbon-intensive sectors, exposing themselves to potential transition risk. This paper quantifies the impact of this risk and the role of various policies and policy designs in mitigating it. It does so with a two-country two-sector environmental dynamic stochastic general equilibrium model, where each “country†represents a bloc of advanced or emerging economies, respectively. The model includes real-world features such as financial frictions and financial and trade linkages across blocs. With it, we simulate climate policy in advanced economies, in the form of carbon taxes and tariffs, and international coordination around a minimum global carbon price. This paper identifies and quantifies important vulnerabilities among emerging economies to the implementation of climate policy in advanced economies.

Suggested Citation

  • Carattini, Stefano & Kim, Giseong & Melkadze, Givi & Pommeret, Aude, 2026. "Transition Risk in Emerging Economies," CEPR Discussion Papers 22059, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:22059
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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