Carbon emission trading scheme and firm debt financing

Nan Huang, Rong He, Le Luo and Hongtao Shen

Journal of Contemporary Accounting and Economics, 2024, vol. 20, issue 1

Abstract: This study examines the impact of firms’ participation in an emissions trading scheme (ETS) on their debt financing. Using a unique quasi-natural experimental setting in China, we find that the cost of debt increases and firm access to debt decreases when firms participate in an ETS, which indicates that lenders interpret firms’ participation in an ETS as a potential risk compared to nonparticipation. Further analyses show that the negative effect of participation in an ETS on firm debt financing is more significant for ETS participants that are less able to pass costs on, that operate in regions with less financial marketization, and that are less innovative. For firms that are covered by the national ETS, the restricted access to debt is alleviated for those with experience in a pilot ETS.

Keywords: ETS; Debt financing; Quasi-natural experiment; China (search for similar items in EconPapers)
JEL-codes: G32 M41 Q50 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:20:y:2024:i:1:s1815566923000346

DOI: 10.1016/j.jcae.2023.100384

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