This PRIN 2022 PNRR project analyses the indirect risks of the climate transition and highlights the role of interdependencies between markets and economic sectors in determining system stability.
The transition to a decarbonized economy requires striking the right balance between investments aimed at reducing emissions and maintaining long-term competitiveness. However, sudden shocks can disrupt this balance, causing companies to make short-term decisions that leave them vulnerable to indirect effects, emphasizing the systemic relevance of such economic and financial interdependencies.
Against this backdrop, the project Measuring, Managing and Hedging Indirect Climate Transition Risk, funded by PRIN 2022 PNRR, proposes an innovative approach focused on interactions in financial markets. The project analyses transition risks at firm level, distinguishing between direct components, linked to operational activities, and indirect components, generated by interconnections between productive sectors.
The project was coordinated by Professor Luca Regis of the University of Turin, in collaboration with the Politecnico di Milano, the University of Bologna, and the University of Eastern Piedmont. The research unit of Politecnico di Milano was coordinated by Prof. Andrea Flori of the Department of Management, Economics and Industrial Engineering. Polimi’s research focused on the interconnections among energy commodities to assess the functioning and stability of the European Union Emissions Trading Scheme (EU ETS). The analysis examined contagion dynamics across markets, paying particular attention to the energy commodities sector and distinguishing between short- and long-term effects, as well as between business as usual periods and and distressed phases. This approach identified key elements for understanding the resilience of the economic system and the risks arising from interdependencies between productive sectors and markets.
The project’s results were disseminated through scientific publications in international journals and presentations at academic conferences. Two thematic workshops were also held to facilitate dialogue among researchers, professionals, and stakeholders, fostering discussion on emerging issues related to climate transition risk management. These workshops took place on 12 July 2024 and 27 October 2025 at the Department of Management, Economics and Industrial Engineering of the Politecnico di Milano.
Overall, the project emphasizes the importance of understanding indirect risks for the stability of European markets and economy. It provides useful tools for anticipating and mitigating the effects of the climate transition in an increasingly uncertain environment.