The E-axes Forum on Climate Change, Macroeconomics, and Finance

Olivier Darmouni

“Brown Capital (Re)Allocation”

Young Scholars' Webinar on Climate Finance and Economics

From the Abstract:  This paper studies capital reallocation in the fossil fuel industry by investigating who owns coal power plants – the largest single source of global greenhouse gas emissions. We build a bottom-up measure of the ownership of these brown assets by merging assetlevel data on firms’ plant ownership (real capital) in with firms’ shareholder data (financial capital). In spite of a sharp increase in the private ownership of coal since 2015, a formal decomposition shows that the large decline in public equity ownership was not due to capital reallocation (“exit”) but to capital utilization: these investors scaled down plants, not sold them. Instead, state investors played a crucial role: they sold to private firms, while being the slowest at scaling down their plants. We illustrate the economics of brown capital (re)allocation by calibrating a model in which asset owners vary in how they value externalities. The possibility of nationalization by state investors that value social factors (i.e. “energy security”) is an important limit to the ability of “green finance” to decrease aggregate emissions, in line with recent episodes in Germany and Poland.


Parinitha Sastry
Assistant Professor of Finance, Columbia Business School

Organizing Committee

Michael Barnett, Arizona State University
Diego Kaenzig, Northwestern University
Alissa Kleinnijenhuis, Cornell University
Parinitha Sastry, Columbia University
Ishita Sen, Harvard University

Olivier Darmouni

Olivier Darmouni is Associate Professor at Columbia Business School and a financial economist whose research interests span corporate finance, financial intermediation, and the energy transition. He applies a variety of empirical methods to understand how frictions affect firms’ investment and credit markets. Prior to joining Columbia, Olivier graduated with a PhD in Economics from Princeton University.

Paper and slides

Brown Capital (Re)Allocation



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