The entire global banking system is currently dependent on us keeping our fossil fuel habit.
SSRN · March 18, 2026 · 6295618
The Takeaway
This analysis of OECD countries reveals a direct positive link between fossil fuel use and bank capitalization levels. It suggests a major policy paradox: the very energy transition needed to save the environment could inherently destabilize the financial sector's resilience, as current banking stability is built on the back of the old energy economy.
From the abstract
This article seeks to explore and analyze the interrelationship between environmental factors, the structure of the energy sector, and stability/resilience within the financial sector by employing data from OECD countries between 2004 and 2021. The article utilizes new data sets provided by the World Bank Group's Global Financial Development Data and Sovereign ESG Data, with specific emphasis placed on the bank capitalization indicator, which is described as the bank capital asset ratio, and is