The Vienna Climate Finance Network comprises researchers, central bankers, policymakers, and activists primarily based in and around Vienna. The Network convenes three times a year to freely discuss developments and issues related to climate finance.

The 4th meeting hosted by the Complexity Science Hub Vienna will focus on value chains, cost pass-through, and windfall profits in the context of transition risks.

When firms face additional costs from mitigation policies such as a carbon tax, they try to raise their prices. The extent to which they can pass on these costs depends on factors like market concentration, demand elasticities, trade intensity, and substitution options. In some cases, such as the electricity market, firms may even achieve windfall profits from rising market prices that exceed their carbon costs.

Sudden price increases passed on to buyers can disrupt supply chains and potentially lead to bankruptcies or defaults of vulnerable firms, resulting in losses for banks. These risks might not be apparent from balance sheets or the sector classifications of corporate banks’ clients, as they originate from higher-order supply chain links. During the meeting, we will discuss a model that maps over 10 million supply chain links between more than 200,000 firms, allowing for the identification of contagion-adjusted credit risks for banks.

Two further papers will be discussed, investigating the impact on firm share prices of climate policy announcements and changes in the European carbon price. These papers highlight how the market-perceived impact of climate policies is driven by factors going beyond firms’ carbon emission intensity.

Register here: https://form.jotform.com/241465913903357