The impact of the carbon trading pilot program on the financing cost of green bonds

Haojun Yuan, Jing Liao and Martin Young

Finance Research Letters, 2025, vol. 78, issue C

Abstract: We examine the impact of a market-based initiative, the carbon trading pilot program, on the financing cost of green bonds in China. The results indicate that the financing cost of green bonds is significantly lower in regions included in the carbon trading pilot program. This effect is more pronounced in regions with better renewable energy development and a higher level of marketisation. The mechanism analysis suggests that the pilot program promotes corporate green innovation, leading to a lower financing cost of green bonds. The results of this study highlight the beneficial effects of a market-based environmental policy that alleviates green concerns among market participants.

Keywords: Green bonds; Financing costs; Carbon trading (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004660

DOI: 10.1016/j.frl.2025.107203

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