Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor. The exposure to climate risk varies from region to region, from industry to industry, and from year to year. Crucially, expectations of an increasingly tighter carbon regulatory framework make carbon risk more prominent in the short term in Europe. Basically, a rapid acceleration of the transformation is likely to have significant financial impacts in the near future and, consequently, a faster decline in credit quality in the nearer versus longer term (especially in Europe).