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Carbon taxes and the geography of fossil lending
Laeven,Luc Popov,Alexander
Laeven,Luc
Popov,Alexander
Abstract
Using data on syndicated loans, we find that the introduction of a carbon tax is associated with a decline (increase) in bank lending to coal, oil, and gas companies in domestic (foreign) markets. This manifestation of tax arbitrage is particularly pronounced for banks with large fossil-lending exposures, suggesting a role for bank specialization. Lending to private companies in foreign markets increases relatively more, implying bank 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 environmental regulation and bank supervision.
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Date
2023-09
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Keywords
Carbon taxes, Climate change, Cross-border lending, F3 - International Finance, G15 - International Financial Markets, G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages, H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies, Q5 - Environmental Economics, SDG 8 - Decent Work and Economic Growth, SDG 13 - Climate Action, SDG 1 - No Poverty
Citation
Laeven, L & Popov, A 2023, 'Carbon taxes and the geography of fossil lending', Journal of International Economics, vol. 144, 103797. https://doi.org/10.1016/j.jinteco.2023.103797