Following the Money: Who is Keeping Coal Alive?

Gregor Schwerhoff and Mouhamadou Sy

No 2024/228, IMF Working Papers from International Monetary Fund

Abstract: The 2023 United Nations Climate Change Conference reinforced already existing pressure to transition away from fossil fuels, in particular for the most polluting source, coal. We use a comprehensive dataset on bank loans for coal projects to shed light on which type of banks continue to finance coal and how coal phase-out commitments affect coal financing. We find that coal financing is becoming increasingly concentrated, partly in banks with a very high coal exposure. We also find that many coal loans have maturities much shorter than the remaining lifetime of coal assets, thus exposing equity holders of coal assets to the risk of a more difficult loan rollover. An econometric analysis shows that countries with a strong commitment to coal phase-out, fixed in national law for example, receive less coal financing. Using an instrumental variable, we identify this effect as causal.

Keywords: Coal; climate change; stranded assets; coal; divestment; United Nations climate change conference; Coal financing; phase-out commitment; coal financing; financing to the coal sector; Non-renewable resources; Financial sector development; Climate policy; Foreign direct investment; Asia and Pacific; Global; Europe; Middle East; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 28
Date: 2024-11-01
New Economics Papers: this item is included in nep-ban, nep-ene, nep-env and nep-inv
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