World Bank2025-11-132025-11-132025-11-05https://hdl.handle.net/10986/43973This first climate transition risk stress test for the Albanian banking sector assesses the macroeconomic and financial sector implications of Albania’s shift to a low-carbon economy under different climate policy scenarios. It builds upon earlier exposure analyses conducted for the Albanian banking sector, which identified the main climate-related risks and transmission mechanisms impacting financial institutions. By quantifying the potential impact of transition risks, this analysis contributes to the Bank of Albania’s broader efforts to deepen understanding of climate-related financial risks. The focus here is on how the banking sector may adjust to economic changes stemming from the introduction of a carbon tax, which is used as a representative proxy for a wider set of transition-related policies. This analysis serves as an initial step in assessing climate risks, laying the groundwork for more comprehensive future assessments. It will be followed by further work, including an assessment of climate physical risks.en-USCC BY-NC 3.0 IGOCLIMATE ACTIONCLIMATE CHANGE ADAPTATIONBANKINGFINANCIAL SECTOR DEVELOPMENTENVIRONMENTAL ECONOMICSReportWorld Bank