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Switching towards coal or renewable energy? The effects of financial capital on energy transitions

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  • Best, Rohan

Abstract

Does a country's stock of financial capital affect its ability to achieve energy transitions? This paper uses data for up to 137 countries for the period 1998–2013 to investigate the importance of financial capital for changes in the use of each energy type. I find that financial capital supports transition to more capital-intensive energy types. For high-income countries, financial capital facilitates transitions from fossil fuels to modern renewable energy sources, especially wind. Both private credit from banks and domestic private debt securities support greater shares of wind energy. For lower-income countries, financial capital supports progression from biomass towards fossil fuel energy sources such as coal. I also find that countries with larger stocks of financial capital are more likely to move to more capital-intensive electricity generation systems.

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  • Best, Rohan, 2017. "Switching towards coal or renewable energy? The effects of financial capital on energy transitions," Energy Economics, Elsevier, vol. 63(C), pages 75-83.
    • Handle: RePEc:eee:eneeco:v:63:y:2017:i:c:p:75-83
    DOI: 10.1016/j.eneco.2017.01.019
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    More about this item

    Keywords

    Energy; Financial capital;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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