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Working Paper
A New Measure of Climate Transition Risk Based on Distance to a Global Emission Factor Frontier
Targeted financing of transition to a "net zero" global economy entails climate transition risk. We propose a measure of transition risk at the country-sector dyad level composed of five tiers of transition risk based on two factors: i) the gap between a dyad's existing emission factor (EF) -- a measure of the greenhouse gas intensity of output -- and the global 'frontier' sectoral EF, and ii) a dyad's recent convergence towards the frontier EF. Dyads that are either close to the frontier or converging towards the frontier carry lower transition risk. Our measure, using 45 sectors across 66 ...