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Financing the low-carbon transition in Europe

Author

Listed:
  • Carradori, Olimpia
  • Giuzio, Margherita
  • Kapadia, Sujit
  • Salakhova, Dilyara
  • Vozian, Katia

Abstract

Using evidence from the EU emissions trading system, we collect verified emissions of close to 4000 highly polluting and mostly non-listed firms responsible for 26% of EU’s emissions. Over the period 2013 - 2019, we find a non-linear relationship between leverage and emissions. A firm with higher leverage has lower emissions in subsequent years. However, when leverage exceeds 50%, a further increase is associated with higher emissions. Our difference-in-differences approach sheds light on the existence of a group of firms that are too indebted to successfully accomplish the low-carbon transition, even when they face a steep increase in the cost of their emissions. JEL Classification: C58, E58, G32, Q51, Q56, Q58

Suggested Citation

  • Carradori, Olimpia & Giuzio, Margherita & Kapadia, Sujit & Salakhova, Dilyara & Vozian, Katia, 2023. "Financing the low-carbon transition in Europe," Working Paper Series 2813, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232813
    Note: 3546207
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2813~170abcd3b8.en.pdf
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    More about this item

    Keywords

    climate change; debt finance; EU ETS; low-carbon transition; transition finance;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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