Pushed to finance? Assessing technology export as a motivator for coal finance abroad

Abstract

The construction of new coal-fired power plants is frequently financed by banks from abroad. Recent studies suggest that the opportunity to export technology is a relevant ‘push factor’ for such financing activities. In this paper, we provide first quantitative evidence for this hypothesis on a global scale. We construct a novel dataset that tracks both public and private financial involvement on a coal unit level, including information on equipment manufacturers and service providers. The findings indicate that financial institutions from various countries, including China, Japan, South Korea, and Western nations provide loans to coal units overseas. These finance flows, particularly from publicly owned banks, are accompanied by technology exports from the same country. Complementing our quantitative analysis with semi-structured interviews, we find indications that political economy factors, such as public banks’ requirement for participation of domestic firms in financing deals and the unlocking of export business opportunities for domestic industries in financing countries, contribute to this correlation. Our findings highlight the importance of financing countries and their domestic industries for low-carbon transitions globally.

Keywords

• climate change mitigation
• coal-fired power plants
• political economy
• financing
• technology export