Chapter 3

Question 1

Examples of policy solutions to achieve emission reduction (3)

Answer 1

1. Carbon tax
2. Set price on emissions
3. Limit on emissions quantity

Question 2

Sources of transition risks (4)

Answer 2

1. Policy and Legal Risks (e.g. carbon tax, mandate to close a carbon-fired power plant)
2. Technology risks (batteries and renewable energy become cheaper and cost-comparable)
3. Reputational risk and consumer pressure (green steel, made by hydrogen, and not coal combustion)
4. Market R, other transition R (shifting demand to low-carbon products and commodities)

Question 3

Write off meaning

Answer 3

“write off an asset” - remove the asset from the firm’s financial records, because it has become worthless, lost value (acknowledge the loss)

Question 4

Example of how physical risks affect real estate market

Answer 4

Buildings in the areas exposed to Sea Level Rise risk sell at a discount. 19% of retail spaces in Europe are exposed to floods

Question 5

Example of how transition risks can affect Real Estate market

Answer 5

Heating and energy use by the buildings (e.g. using coal-fire plant to provide electricity for heaters or boil water for water-based pipes)