Investigating the role of effective capital markets for climate protection and energy transition.
The Postdam Institute for Climate Impact Research (PIK) and the Mercator Research Institute on Global Commons and Climate Change (MCC) published their study in which an analysis of the role of effective capital markets for climate protection and energy transition was conducted.
For the study, the research team has developed a sophisticated computational model, and has fed it with empirical data. The study’s key message for policymakers is summarised by its PIK lead author, Kai Lessmann, as follows: “Governments need to take a close look at whether the higher interest rate for loans merely reflects the actual intermediation costs or whether it is also a result of too little banking competition, for which there is some evidence. If the market structure is indeed the reason for the spread, and cannot be modified in the medium term, then policymakers can effectively counteract it in the short term by subsidising investment.” In this context, the study shows that if the government decides to provide economy-wide investment support, this is better for the climate and the economy than if eco-projects alone are subsidised. “The structural change toward fossil-free technologies then occurs automatically,” Lessmann points out. “These are generally more capital-intensive and thus benefit to a greater extent from reduced credit costs. Also, the carbon price, which increases over time, exerts its steering effect.”
