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

Abstract

switching towards coal or renewable energy? the effects of financial capital on energy transitions rohan best australian national university february 2017 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 capitalintensive electricity generation systems. keywords: energy; financial capital (jel o11, o13, q42, q43) 1. introduction in this paper i use national data to examine the influence of different types of financial capital on consumption of different types of energy: biofuels and waste; hydro; coal; oil; natural gas; nuclear; wind; solar; and geothermal. in addition to analysis for a world sample, i present separate assessments for high-income and lower-income countries to reveal differences in the …

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