Carbon Taxes and the Geography of Fossil Lending
69 Pages Posted: 22 Dec 2022
There are 2 versions of this paper
Carbon Taxes and the Geography of Fossil Lending
Carbon Taxes and the Geography of Fossil Lending
Date Written: December 1, 2022
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, suggesting a role for bank specialization. Lending to private companies in foreign markets increases relatively more, which points to an intensification of banks’ incentives to avoid public scrutiny. We also find that banks reallocate a relatively larger share of their fossil loan portfolio to countries with less strict environ-mental regulation and bank supervision.
Keywords: carbon taxes, climate change, cross-border lending
JEL Classification: F3, G15, G21, H23, Q5
Suggested Citation: Suggested Citation