 Credit default swaps and corporate carbon emissions in JapanTatsuyoshi Okimoto and Sumiko Takaoka Energy Economics, 2024, vol. 133, issue C Abstract: We examine the relationship between carbon emissions and the market perception of firms’ default risk, measured by corporate credit default swap (CDS) spreads in Japan. While corporate revenue size is the most significant factor of carbon emissions, pressure from investors has a significant decreasing effect on carbon emissions, which is greater for investment-grade companies. We find that carbon emissions have time-varying effects on corporate CDS spreads, which supports the “investor awareness” hypothesis across sectors and credit quality. The sectoral impacts indicate that carbon emissions are priced prominently in the CDS spreads of firms in sectors where the transition to carbon-free energy sources appears to be relatively less complicated and less expensive. Finally, we report the impacts of carbon emissions on the CDS spread curve, where they are priced in both short- and long-term CDS spreads, and high carbon emissions steepen the CDS spread curve. Keywords: CDS spreads; Carbon emissions; Carbon risk; Climate change; Investor awareness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:133:y:2024:i:c:s0140988324002123 DOI: 10.1016/j.eneco.2024.107504 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 |
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