The cost of debt of renewable and non-renewable energy firms

Karol Kempa, Ulf Moslener and Oliver Schenker (2021)

To transform the energy system, a large amount of investment is needed. Debt is the major source of external funding to finance firm’s investment. However, higher risks inherent to new low-carbon sectors vs. established but carbon-intensive sectors might lead to higher cost of debt for RE firms. The results of the paper suggest that RE firms might face a higher cost of debt initially indeed, when technologies and markets are young and immature. However, a cost advantage of renewable energy firms emerges over time. In addition, the researchers present evidence that policies are important for this reduction of the relative cost of debt for RE firms. A credible policy provides a positive signal for the RE sector reducing the risk perceived by lenders.

A research framework for analysing policy implications of investment imperfections in sustainable climate finance

Menglu Neupert-Zhuang and Oliver Schenker (2019)

In this research report, a research framework is proposed to facilitate the studying on the policy implications of investment imperfections in sustainable climate finance. Our research motivation is based on the observed disparity between real-world investment decision making and the simplistic assumptions on how these decisions are made in techno-economic policy analysis models. The report provides a structured overview on key concepts of sustainable climate finance, a critical review of literature on theories of finance, a summary on sources of investment imperfection, and identification of insufficiencies in the integrated assessment models. It could be useful as a guide to structure problems and research questions in the sustainable climate finance field.