Carbon Emission Trading and Corporate Financing: Evidence from China

Li Meng, Ke Wang, Taoyong Su and He He
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Li Meng: School of Economics and Management, Tongji University, Shanghai 200092, China
Ke Wang: School of Economics and Management, Tongji University, Shanghai 200092, China
Taoyong Su: School of Economics and Management, Tongji University, Shanghai 200092, China
He He: School of Economics, Shanghai University, Shanghai 200444, China

Energies, 2022, vol. 15, issue 14, 1-13

Abstract: As an important tool to control CO 2 emission, carbon emission trading (CET) has been highlighted in prior studies for its positive effects on firms. However, we are concerned about the role of the CET in corporate financing. Through a quasi-natural experiment from China’s CET pilot, regarded as the start-up stage of China’s emission trading system, we investigate the manufacturing corporate financing (i.e., debt and commercial credit financing). The results show that the firms in China’s CET market have less debt financing. Additionally, in the heterogeneity analysis, we found that (1) the CET is negatively related to corporate financing when their financing constraints are weak, whereas it only reduces long-term debt for the firms with strong financing constraints. (2) The impact of the CET on corporate financing is not significant for the firms located in first-tier cities in China, but in other cities, the CET negatively influences firms’ long-term debt and contributes to commercial credit financing. (3) The CET only plays a negative role in long-term debt and a positive role in commercial credit financing for firms in high energy-consuming industries. This study enlightens the government to improve the emission trading system and increase financing support to manufacturing firms in the CET market.

Keywords: carbon emission trading; corporate financing; manufacturing firm (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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