Volume 29: Closing Carbon Cycles – A Transformation Process Involving Technology, Economy, and Society: Part IV

Geopolitical and climate risks threaten financial stability and energy transitions Franziska M. Hoffart, Paola D’Orazio, Claudia Kemfert

Abstract

We propose a framework to unravel the hurdles and opportunities for the renewable energy transition in con-temporary crises to examine the interconnections be-tween energy transition, climate risks, and geopolitical issues. The study focuses on Germany and emphasizes that neglecting climate-related risks leads to financial in-stability and hampers the energy transition. If Paris-aligned energy and financial policies are not in place, fur-ther cascade (negative) effects on energy transitions may occur. Uncertainty and instability caused by geopolitical crises intensify negative feedback loops. Climate mitiga-tion is thus critical because climate concerns affect finan-cial stability and the orderly path of energy transitions.

Keywords climate change, climate-related financial risks, climate policy, energy transition, financial stability, geopolitical crisis