Energy finance: Capital drives transition

Climate scientists and policymakers often assume that energy markets and regulatory provisions are efficient tools where the right level of capital to sustain the transition to low-carbon-generation technologies will automatically materialize if only the right level of risk and allowed return on investment is offered to the investors. However, widespread evidence demonstrates that, despite the improved financial performance of most renewable energy sources, fossil fuel technologies are still attracting large investment, in particular in emerging economies. The economic literature is generally silent on the role that financial markets play in fostering the low-carbon transition. Rohan Best, from the Australian National University, fills this gap by studying the impact that financial capital stock plays in achieving energy transition.