Carbon Taxes and the Geography of Fossil Lending

Luc Laeven and Alexander Popov

No 16745, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using data on syndicated loans, we find that the introduction of a carbon tax is associated with an increase in domestic banks' lending to coal, oil, and gas companies in foreign countries. This effect is particularly pronounced for banks with large prior fossil-lending exposures, while bank capital and profitability do not play a role. In addition, banks reallocate a relatively larger share of their fossil loan portfolio to countries without a carbon tax. Our findings speak to the importance of a global carbon tax to prevent the reallocation of carbon emissions across national borders via financial markets.

Keywords: Carbon taxes; Cross-border lending; Climate change (search for similar items in EconPapers)
JEL-codes: G15 G21 H23 Q5 (search for similar items in EconPapers)
Date: 2021-11
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Related works:
Journal Article: Carbon taxes and the geography of fossil lending (2023)
Working Paper: Carbon taxes and the geography of fossil lending (2022)
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