As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Ralph de Haas, Director of Research at the European Bank for Reconstruction and Development (EBRD). He will present his research titled Financial Development and Green Growth.

Abstract: We study how countries’ financial structure—i.e., the importance of stock markets relative to bank-based financial intermediation—affects their transition to low-carbon growth. To do so, we use a novel data set of output, carbon emissions, and green patents for 16 industries in 48 countries during the period 1990–2013. We find that for a given level of economic and financial development and environmental regulation, carbon emissions per capita decline faster in economies that receive a higher share of their funding from stock markets. Industry-level analysis reveals two channels. First, deeper stock markets reallocate investment towards energy-efficient sectors, reducing the share of output generated by carbon-intensive sectors. Second, in countries with deeper stock markets, firms in carbon-intensive sectors engage in more green innovation, which results in lower carbon emissions per unit of output. We find only limited evidence for cross-border spill-overs: only one-tenth of these industry-level reductions in domestic carbon emissions are offset by increased carbon embedded in imports. A firm-level analysis of an exogenous shock to the cost of equity in Belgium confirms our findings. When equity becomes relatively cheaper, firms reduce their dependence on bank credit, and this is followed by a reduction in the carbon-intensity of their production process.

Ralph de Haas holds a PhD in Economics from Utrecht University and previously worked as a Senior Economist in the Prudential Supervision Department and the Economic Policy and Research Department of the Dutch central bank. He is also a part-time Associate Professor of Finance at Tilburg University; a CEPR Research Fellow; a Fellow at the European Banking Center (EBC); a Senior Fellow at LSE’s Institute of Global Affairs; and the recipient of the 2014 Willem F. Duisenberg Fellowship Prize. His main research interests include international banking, financial inclusion and small-business finance, and development economics.