Financing the energy transition in times of financial market instability
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In: DIW Economic Bulletin, Vol. 2, No. 9, 2012, p. 3-13.
Research output: Journal contributions › Journal articles › Research
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TY - JOUR
T1 - Financing the energy transition in times of financial market instability
AU - Kemfert, Claudia
AU - Schäfer, Dorothea
PY - 2012
Y1 - 2012
N2 - One of the most pressing public priorities in Germany at present is how to organize the energy transition. However, the cost of stabilizing the financial sector as well as the fiscal pact and the debt brake mean that the government has limited financial resources. Consequently, the availability of private capital, whether in the form of equity or debt, is becoming a decisive factor in the success of the German energy transition. Recently, there have been increasing indications that banks are very reluctant to provide loans and are focusing on the potential risks of financing the switch to renewable energy. At the same time, however, the financial sector is also wrestling with political decision-makers about the capital requirements of the loans concerned. Yet, reducing the capital base in the banking sector is out of the question. Instead, the government should also call for appropriate involvement of the major banks in financing the energy transition in return for implicit guarantees for those banks, just as financial aid from the government was linked to loans being granted to SMEs in 2008. At the same time, the risks have to be spread more widely. Know-how and financial strength of private equity funds may be of help here.
AB - One of the most pressing public priorities in Germany at present is how to organize the energy transition. However, the cost of stabilizing the financial sector as well as the fiscal pact and the debt brake mean that the government has limited financial resources. Consequently, the availability of private capital, whether in the form of equity or debt, is becoming a decisive factor in the success of the German energy transition. Recently, there have been increasing indications that banks are very reluctant to provide loans and are focusing on the potential risks of financing the switch to renewable energy. At the same time, however, the financial sector is also wrestling with political decision-makers about the capital requirements of the loans concerned. Yet, reducing the capital base in the banking sector is out of the question. Instead, the government should also call for appropriate involvement of the major banks in financing the energy transition in return for implicit guarantees for those banks, just as financial aid from the government was linked to loans being granted to SMEs in 2008. At the same time, the risks have to be spread more widely. Know-how and financial strength of private equity funds may be of help here.
KW - Economics
KW - sustainable financial architecture
KW - energy transition in Germany
KW - investment in new infrastructure
M3 - Journal articles
VL - 2
SP - 3
EP - 13
JO - DIW Economic Bulletin
JF - DIW Economic Bulletin
SN - 2192-7219
IS - 9
ER -