Carbon Taxes and the Geography of Fossil Lending

69 Pages Posted: 22 Dec 2022

See all articles by Luc Laeven

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Alexander A. Popov

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

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

Laeven, Luc A. and Popov, Alexander A., Carbon Taxes and the Geography of Fossil Lending (December 1, 2022). ECB Working Paper No. 2022/2762, Available at SSRN: https://ssrn.com/abstract=4309180 or http://dx.doi.org/10.2139/ssrn.4309180

Luc A. Laeven (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alexander A. Popov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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