ICAEW SE · Chapter 4 · Question 5 of 18
A government introduces a new carbon tax that significantly increases the operating costs of a cement manufacturer. What type of climate-related risk is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Transition risk (policy and legal)
Explanation
Transition risks arise from policy, legal, technology, market and reputational changes as the economy moves towards lower emissions. A new carbon tax is a policy change, so it is a policy and legal transition risk. It is not caused by the physical effects of climate change.
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