Pollution permits and financing costs

Fabio Antoniou, Manthos Delis, Steven Ongena and Chris Tsoumas
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Steven Ongena: CEPR - Center for Economic Policy Research
Chris Tsoumas: Hellenic Open University [Patras]

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Abstract: Effective environmental policy should consider how the financiers of polluting firms behave. We study phase III of the EU Emission Trading System. Loan spreads for cap‐and‐trade participants are a function of compliance costs, permit market features, and firms' strategic actions. In contrast with the program intentions, we find that loan spreads fall by approximately 25%. We show that this decrease is almost entirely driven by low permit prices, the firms' proactiveness to store permits, and imperfect foresight of market conditions in phase III. The drop in spreads cannot be explained by the decline in energy prices and/or other confounding factors.

Keywords: Pollution permits; Financing costs; Environmental finance (search for similar items in EconPapers)
Date: 2026-04
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Published in Journal of Money, Credit and Banking, 2026, 58 (3), pp.637-679. ⟨10.1111/jmcb.13241⟩

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Related works:
Journal Article: Pollution Permits and Financing Costs (2026)
Working Paper: Pollution permits and financing costs (2020)
Working Paper: Pollution permits and financing costs (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05643530

DOI: 10.1111/jmcb.13241

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