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CESS: Carbon Taxes and the Geography of Fossil Lending - Luc Laeven

Luc Laeven
Wednesday, May 24, 2023, 11:15 am – 12:30 pm

Luc Laeven (European Central Bank and Tilburg University) will present “Carbon Taxes and the Geography of Fossil Lending” (joint with Alexander Popov).

Time and venue: May 24, Wednesday, 11.15 am – 12.30 pm, in QS C-322, RSVP required.

Luc Laeven is currently the Director-General of the Research Department of the European Central Bank and a Professor of Finance at Tilburg University. His research focuses on banking, international finance, and monetary transmission issues.

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.