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Carbon tax in a stock-flow consistent model: The role of commercial banks in financing low-carbon transition

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  • Xing, Xiaoyun
  • Pan, Huanxue
  • Deng, Jing

Abstract

With the purpose of performing a simple and original analysis on the impact of carbon tax on low-carbon transition, this paper presents a stock-flow consistent model, paying special attention to the role of commercial banks. Through theoretical analysis, we find that the reduction effect of carbon tax on carbon emissions is amplified by commercial banks via financing more green investments. Moreover, such effect is altered by commercial banks’ capability to issue green loans. The results obtained in this paper facilitate the understandings about carbon tax and its coordination with bank-centered financial policies.

Suggested Citation

  • Xing, Xiaoyun & Pan, Huanxue & Deng, Jing, 2022. "Carbon tax in a stock-flow consistent model: The role of commercial banks in financing low-carbon transition," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322003920
    DOI: 10.1016/j.frl.2022.103186
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    More about this item

    Keywords

    Carbon tax; Low-carbon transition; Green credit; Stock-flow consistent approach;
    All these keywords.

    JEL classification:

    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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