Finance and Green Growth

Ralph De Haas and Alexander Popov

No 14012, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how countries’ financial structure affects their transition to low-carbon growth. Using global industry-level data, we document that carbon-intensive industries reduce emissions faster in economies with deeper stock markets. The main channel underpinning this stylised fact is that stock markets facilitate green innovation in carbon-intensive sectors, resulting in lower carbon emissions per unit of output. More tentative evidence indicates that stock markets also help to reallocate investment towards more energy-efficient sectors. Cross-border spill-overs are limited: less than five percent of these industry-level reductions in domestic emissions are offset by carbon embedded in imports. A firm-level analysis of an exogenous shock to the cost of equity in Belgium confirms our findings.

Keywords: Financial development; Financial structure; Carbon emissions; Innovation (search for similar items in EconPapers)
JEL-codes: G10 O4 Q5 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-cfn, nep-ene, nep-fdg and nep-hme
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Citations: View citations in EconPapers (51)

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Journal Article: Finance and Green Growth (2023)
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