IMF Working Papers

Following the Money: Who is Keeping Coal Alive?

By Gregor Schwerhoff, Mouhamadou Sy

November 1, 2024

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Format: Chicago

Gregor Schwerhoff, and Mouhamadou Sy. "Following the Money: Who is Keeping Coal Alive?", IMF Working Papers 2024, 228 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400290053.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The 2023 United Nations Climate Change Conference reinforced already existing pressure to transition away from fossil fuels, in particular for the most polluting source, coal. We use a comprehensive dataset on bank loans for coal projects to shed light on which type of banks continue to finance coal and how coal phase-out commitments affect coal financing. We find that coal financing is becoming increasingly concentrated, partly in banks with a very high coal exposure. We also find that many coal loans have maturities much shorter than the remaining lifetime of coal assets, thus exposing equity holders of coal assets to the risk of a more difficult loan rollover. An econometric analysis shows that countries with a strong commitment to coal phase-out, fixed in national law for example, receive less coal financing. Using an instrumental variable, we identify this effect as causal.

Keywords: Climate change, Coal, Coal, Divestment, Stranded assets

Publication Details