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Lending Interest Rate, Loaning Scale, and Government Subsidy Scale in Green Innovation

Author

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  • Shuanglian Chen

    (Guangzhou International Institute of Finance, Guangzhou University, Guangzhou 510405, China)

  • Zhehao Huang

    (Guangzhou International Institute of Finance, Guangzhou University, Guangzhou 510405, China)

  • Benjamin M. Drakeford

    (Department of Economics and Finance, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK)

  • Pierre Failler

    (Department of Economics and Finance, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK)

Abstract

Green loans are a way of financing green innovation. Two important factors, the lending interest rate and the loaning scale, should be focused on. In this paper, we explore the impact of lending interest rates and loaning scale on green innovation. We show that the incentive of green innovation strongly depends on the lending interest rate and the loaning scale through model analysis. Moreover, the dependence is summarized as a two-step strategy. In the first step, the lending interest rate should be lower than some rate thresholds given in the paper. Otherwise, green innovation fails to be stimulated. In the second step, if the lending interest rate is lower than the given rate threshold, then the practical loaning scale should lie between two thresholds of loaning scale derived in the paper, such that the green innovation will be stimulated. What is more, to guarantee the green effect of the innovation on the environment, we construct a threshold of loaning scale. If the loaning scale is larger than this threshold, then the innovation will show green effect on the environment. Otherwise, green innovation loses its environmental significance. The government stimulates green innovation through government subsidy. In this paper, we consider three kinds of government subsidy, including a subsidy for the bank, subsidy for the enterprise before and after implementing green innovation. Some appropriate government subsidy scales are presented.

Suggested Citation

  • Shuanglian Chen & Zhehao Huang & Benjamin M. Drakeford & Pierre Failler, 2019. "Lending Interest Rate, Loaning Scale, and Government Subsidy Scale in Green Innovation," Energies, MDPI, vol. 12(23), pages 1-22, November.
    • Handle: RePEc:gam:jeners:v:12:y:2019:i:23:p:4431-:d:289632
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