Mobilizing credit for clean energy: De-risking and public loan provision under learning spillovers

Paul Waidelich, Joscha Krug and Bjarne Steffen

Journal of Environmental Economics and Management, 2025, vol. 133, issue C

Abstract: This paper analyzes bank lending behavior toward novel clean energy technologies in the presence of high screening costs and potential learning-by-lending. In a two-period model, bank loans in the first period build up banks’ financing experience with the novel technology, which improves lending profitability and partially spills over to peers. Because of these learning externalities, such early-stage loans are either undersupplied by the market (a cooperation problem) or do not occur at all if the banking sector remains stuck in an inferior market equilibrium with no lending (a coordination problem). We propose a policy mix in which public loan provision eliminates the inferior equilibrium, thereby resolving the coordination problem, while de-risking subsidies internalize learning spillovers to peers. Our findings highlight the role of public financial policies if environmental and innovation externalities are already addressed, and we provide a numerical application to the early stage of offshore wind energy in Germany as a plausible context for our policy implications.

Keywords: Climate policy; Credit guarantees; Government loans; Multiple equilibria; Renewable energy; State investment bank; Offshore wind; Social tipping point (search for similar items in EconPapers)
JEL-codes: G21 H81 Q48 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:133:y:2025:i:c:s0095069625001068

DOI: 10.1016/j.jeem.2025.103222

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