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Energy Transition And The Changing Cost Of Capital: 2023 Review

  • The cost of equity and debt is lower for renewable electric utilities with a higher share of solar and wind power capacities than fossil-fuel focused peers, with the variation in the cost of capital across regions: a lower cost of capital in Europe, a higher cost in China, and mixed trends in North America, as per the research conducted by the Oxford Sustainable Finance Group.
  • Financial institutions respond to climate risks according to the geographical context, including the stringency of local environmental policy.
  • Globally, the cost of capital for energy production is the highest for coal mining, followed by oil & gas production and renewable fuels, with similar trends in Europe.
  • In North America, the cost of debt for coal mining and renewable fuels is higher and more volatile than in oil & gas production and services, while the cost of equity is the highest for oil & gas production.
  • In China, the cost of debt is the highest for oil & gas production, followed by coal mining and renewable fuels, in contrast with the cost of equity which is the highest for renewable fuels & technology.

Access article: Oxford Sustainable Finance Group