Finance and Carbon Emissions
Ralph de Haas and
Alexander Popov ()
No 14012, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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
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Working Paper: Finance and carbon emissions (2019)
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