How does China's decarbonization policy influence the value of carbon-intensive firms?

Peizhi Liu and Haishu Qiao

Finance Research Letters, 2021, vol. 43, issue C

Abstract: This paper studies carbon asset stranding risks under climate policy. We leverage the financial data of listed companies between 2005 and 2020 to exploit the development of China's decarbonization policy aimed at reducing carbon emissions and analyze its effect on the valuation of carbon-intensive firms. The results find that stranding risks are noticed, and the valuation of high-carbon companies is reduced compared to low emitters under China's decarbonization policy. This response exhibits a five-year cyclical fluctuation. Mechanistic evidence points to raising credit risks and increasing debt costs as major channels.

Keywords: Carbon assets stranding risks; Decarbonization policy; Carbon-intensive firms; Difference-in-differences (DID) (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321002221

DOI: 10.1016/j.frl.2021.102141

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