Brown Capital (Re)Allocation

We study who owns coal power plants - the largest single source of carbon emissions - in Europe. A sharp increase in private firms' ownership was met by a large decline in public equity ownership. This decline was not driven by public equity investors selling plants, but by their scaling down of plants quickly. State investors played a crucial role, selling to private firms and slowly scaling down their plants. We calibrate a model in which asset owners vary in how they value externalities. Nationalization by state investors that value social factors (jobs, "energy security") can hinder "green finance" in decreasing emissions.