Financing constraints, climate policies and carbon emissions

During this workshop Francesco Vona will present the paper Financing constraints, climate policies and carbon emissions by by Mattia Guerini (University of Brescia and FEEM), Giovanni Marin (University of Urbino and FEEM) and Francesco Vona (University of Milan and FEEM).

Abstract

The long-term effects of climate policies crucially depend on firms’ ability to successfully abate emissions. However, financially constrained firms will find it more difficult to change their input mix, invest in carbon-saving technologies and, ultimately, reduce the carbon content of production. Little research has been conducted on the interplay between climate policies and financial constraints at the firm level. This paper fills the gap by exploiting a unique database on French manufacturing companies. The dataset contains detailed information on carbon emissions, environmental policy exposure, and financial variables allowing one to build reliable indicators of financial fragility. We find that after a credit easing policy, the more financially constrained firms have reduced their carbon emissions more. Furthermore, we highlight that such an effect is even amplified for financially constrained firms which are also regulated by the EU ETS policy.

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