Insurer financing for borrowing producers in a supply chain under alternative carbon allowance trades

Xuelian Li, Wei Zhou, Jyh-Jiuan Lin and Ching-Hui Chang

Energy Economics, 2023, vol. 121, issue C

Abstract: The article models the borrowing producers in a production supply chain with insurer green finance. The borrowing firms' transacting carbon allowances (CA) under the cap-and-trade mechanism affect the insurer's loan rate-setting and guaranteed rate-setting decisions. One result shows that a stringent regulatory cap toward carbon emission reduction increases the loans at a reduced loan rate (i.e., reducing the insurer's interest margin). The most significantly reduced margin is the case of the product producer and input provider being CA buyers, and the minor reduction is the CA sellers. We also show that a strict regulatory cap increases the life insurance policies at an increased guaranteed rate (i.e., decreasing the insurer's interest margin), resulting in higher policyholder protection and, thus, insurance stability. Policyholder protection is the most (least) significant when the borrowing firms in the supply chain are CA sellers (buyers) in the cap-and-trade mechanism. In conclusion, the significantly increased policyholder protection reduces the insurer's profits less considerably due to the stringent cap regulation toward sustainable development in a green production supply chain.

Keywords: Production supply chain; Cap-and-trade mechanism; Regulatory cap; Life insurer; Guaranteed rate (search for similar items in EconPapers)
JEL-codes: Q50 Q54 Q57 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988323001822
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:121:y:2023:i:c:s0140988323001822

DOI: 10.1016/j.eneco.2023.106684

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().