Abstract 

We study bank capital requirements as a tool to address financial risks and externalities caused by carbon emissions. Capital regulation can effectively address financial risks but doing so does not necessarily reduce emissions (e.g., higher capital requirements for carbon-intensive loans may crowd out clean lending). Reducing emissions via capital requirements may require sacrificing financial stability or may be altogether infeasible. Carbon taxes are not subject to these drawbacks.

However, if the government cannot commit to future environmental policies, capital requirements can make higher carbon taxes credible by ensuring banks have sufficient capital to absorb losses from stranded asset risk.

The link to the paper can be found here.

Practicalities

This event will be a hybrid event. The seminar will take place in Roeterseiland campus (REC) building M, room number MS.02, and will also be streamed online via Zoom.  

About the speaker 

Martin Oehmke is a professor of Finance at LSE and serves on the Advisory Scientific Committee of the European Systemic Risk Board.

About ACLE

The Amsterdam Center for Law and Economics (ACLE) is a joint initiative of the Faculty of Economics and Business and the Faculty of Law at the University of Amsterdam. The objective of the ACLE is to promote high-quality interdisciplinary research at the intersection between law and economics.