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Journal Article

Financing the transformation: a proposal for a credit scheme to finance the Paris Agreement

Authors
/persons/resource/Ottmar.Edenhofer

Edenhofer,  Ottmar
Potsdam Institute for Climate Impact Research;

Klein,  Christian
External Organizations;

/persons/resource/Kai.Lessmann

Lessmann,  Kai
Potsdam Institute for Climate Impact Research;

Wilkens,  Marco
External Organizations;

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27125.pdf
(Postprint), 3MB

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Citation

Edenhofer, O., Klein, C., Lessmann, K., Wilkens, M. (2022): Financing the transformation: a proposal for a credit scheme to finance the Paris Agreement. - Climate Policy, 22, 6, 788-797.
https://doi.org/10.1080/14693062.2022.2075820


Cite as: https://publications.pik-potsdam.de/pubman/item/item_27125
Abstract
To achieve the goals of the Paris Agreement, massive investments in the real economy are needed. We propose providing long-term interest subsidized loans to companies investing in sustainable projects with the primary goal of greenhouse gas neutrality. In detail, we propose linking loan interest rates to the EU Taxonomy and to future CO2 prices. These links incentivize companies to decarbonize. Furthermore, this link can hedge companies against volatile CO2 prices and incentivizes companies to make their business models more sustainable. Both elements support the transformation process of the economy.