Easing Financial Constraints Reduce Carbon Emissions? Evidence from a Large Sample of French Companies

Mattia Guerini, Giovanni Marin and Francesco Vona

No 376272, FEEM Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: We study how monetary policy shapes firm level carbon emissions. Our identification strategy exploits the European Central Bank’s July 2012 move to the zero lower bound as a plausibly exogenous easing of credit supply, combined with rich administrative and survey data on French manufacturing firms from 2000–2019. Using a difference-in-differences design with debt-to-asset ratios as exposure, we find that financially constrained firms cut emissions by about 9.4% more than unconstrained ones. This effect primarily stems from improvements in energy efficiency, lower carbon intensity of energy, and general productivity improvements associated with capital deepening that outweighed modest scale effects. Small and medium firms drive these results, while large and EU ETS regulated firms show no significant response. On average, emissions fell by 3.3% per year, summing up to 5.3 million tonnes of CO2 saved. Despite the smaller marginal effects, total carbon savings due to the monetary easing are comparable to the savings from the EU ETS, highlighting the untargeted nature of the policy.

Keywords: Climate Change; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 63
Date: 2025-12-01
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https://ageconsearch.umn.edu/record/376272/files/NDL2025-31.pdf (application/pdf)

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Working Paper: Easing Financial Constraints Reduce Carbon Emissions? Evidence from a Large Sample of French Companies (2025)
Working Paper: Easing Financial Constraints Reduce Carbon Emissions? Evidence from a Large Sample of French Companies (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemwp:376272

DOI: 10.22004/ag.econ.376272

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