English
 
Privacy Policy Disclaimer
  Advanced SearchBrowse

Item

ITEM ACTIONSEXPORT

Released

Journal Article

Climate finance intermediation: interest spread effects in a climate policy model

Authors
/persons/resource/Kai.Lessmann

Lessmann,  Kai
Potsdam Institute for Climate Impact Research;

/persons/resource/kalkuhl

Kalkuhl,  Matthias
Potsdam Institute for Climate Impact Research;

External Ressource

https://doi.org/10.7910/DVN/BZSQBP
(Supplementary material)

Fulltext (public)

28444oa.pdf
(Publisher version), 2MB

Supplementary Material (public)
There is no public supplementary material available
Citation

Lessmann, K., Kalkuhl, M. (2024): Climate finance intermediation: interest spread effects in a climate policy model. - Journal of the Association of Environmental and Resource Economists, 11, 1, 213-251.
https://doi.org/10.1086/725920


Cite as: https://publications.pik-potsdam.de/pubman/item/item_28444
Abstract
Interest rates are central determinants of saving and investment decisions. Costly financial intermediation distorts these price signals by creating a spread between deposit and loan rates. This study investigates how bank spreads affect climate policy in its ambition to redirect capital. We identify various channels through which interest spreads affect carbon emissions in a dynamic general equilibrium model. Interest rate spreads increase abatement costs due to the higher relative price for capital-intensive carbon-free energy but they also tend to reduce emissions due to lower overall economic growth. For the global average interest rate spread of 5.1pp, global warming increases by 0.2°C compared to the frictionless economy. For a given temperature target to be achieved, interest rate spreads necessitate substantially higher carbon taxes. When spreads arise from imperfect competition in the intermediation sector, the associated welfare costs can be reduced by clean energy subsidies or even eliminated by economy-wide investment subsidies.