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Finance and Carbon Emissions

Ralph de Haas and Alexander Popov ()

No 14012, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the relation between financial structure and carbon emissions in a large panel of countries and industries. For given levels of economic and financial development, emissions per capita are lower in economies that are relatively more equity-funded. Industry-level analysis reveals two channels. First, deeper stock markets reallocate investment towards cleaner industries and, second, they allow carbon-intensive industries to produce green patents and reduce their energy intensity. Only one-tenth of these industry-level reductions in domestic emissions is offset by increased carbon embedded in imports. A firm-level analysis of an exogenous shock to the cost of equity in Belgium confirms our findings.

Keywords: Carbon Emissions; Financial Development; Financial structure; Innovation (search for similar items in EconPapers)
JEL-codes: G10 O4 Q5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ene, nep-fdg and nep-hme
Date: 2019-09
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