Work

Mobilizing credit for clean energy: De-risking and public loan provision under learning spillovers

Year: 2025

Type: article

Abstract: This paper analyzes bank lending behavior to novel clean energy technologies in the presence of high screening costs and potential learning-by-lending. In a two-period model, bank loans in the first period build up banks’ financing experience with the novel technology, which improves lending profitability and partially spills over to peers. Because of these learning externalities, such early-stage loans are either undersupplied by the market (a cooperation problem) or do not occur at all if the banking sector remains stuck in an inferior market equilibrium with no lending (a coordination problem). We propose a policy mix in which public loan provision eliminates the inferior equilibrium, thereby resolving the coordination problem, while de-risking subsidies internalize learning spillovers to peers. Our findings highlight the role of public financial policies if environmental and innovation externalities are already addressed, and we provide a numerical application to the early stage of offshore wind energy in Germany as a plausible context for our policy implications.

Source: Journal of Environmental Economics and Management

DOI: 10.1016/j.jeem.2025.103222

Authors: Paul Waidelich, Joscha Krug, Bjarne Steffen

Institutions: ETH Zurich, Centre for European Economic Research, University of Mannheim, Massachusetts Institute of Technology

Language: English

Topic: Sustainable Finance and Green Bonds

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Affordable and clean energy, Industry, innovation and infrastructure, Climate action

Open Access status: hybrid

Estimated APC paid: $3,620