Carbon Emission Trading and Corporate Financing: Evidence from China

As an important tool to control CO2 emission, carbon emission trading (CET) has been highlighted in prior studies for its positive effects on firms. However, we are concerned about the role of the CET in corporate financing. Through a quasi-natural experiment from China’s CET pilot, regarded as the...

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Bibliographic Details
Published in:Energies (Basel) 2022-07, Vol.15 (14), p.5036
Main Authors: Meng, Li, Wang, Ke, Su, Taoyong, He, He
Format: Article
Language:English
Subjects:
Carbon
Carbon dioxide
carbon emission trading
Climate change
corporate financing
Credit risk
Debt financing
Emission analysis
Emission standards
Emissions trading
Environmental policy
Greenhouse gases
Heterogeneity
Hypotheses
Literature reviews
Manufacturing
manufacturing firm
Prices
Systems design
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Summary:As an important tool to control CO2 emission, carbon emission trading (CET) has been highlighted in prior studies for its positive effects on firms. However, we are concerned about the role of the CET in corporate financing. Through a quasi-natural experiment from China’s CET pilot, regarded as the start-up stage of China’s emission trading system, we investigate the manufacturing corporate financing (i.e., debt and commercial credit financing). The results show that the firms in China’s CET market have less debt financing. Additionally, in the heterogeneity analysis, we found that (1) the CET is negatively related to corporate financing when their financing constraints are weak, whereas it only reduces long-term debt for the firms with strong financing constraints. (2) The impact of the CET on corporate financing is not significant for the firms located in first-tier cities in China, but in other cities, the CET negatively influences firms’ long-term debt and contributes to commercial credit financing. (3) The CET only plays a negative role in long-term debt and a positive role in commercial credit financing for firms in high energy-consuming industries. This study enlightens the government to improve the emission trading system and increase financing support to manufacturing firms in the CET market.
ISSN:1996-1073
1996-1073
DOI:10.3390/en15145036