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The short-term pain and long-term gain of low-carbon policy for corporate financing

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  • Liu, Wenhao
  • Guo, Yingdong
  • Li, Shuhui

Abstract

China's low-carbon city pilot policy has yielded significant environmental benefits, yet may also exacerbate corporate financing burdens. Using data from A-share listed firms from 2007 to 2022, this paper conducts an empirical analysis of the impact of China's low-carbon city pilot policy on corporate financing constraints. The findings reveal that low-carbon city pilot policy initially exacerbates financing constraints due to compliance costs, but in the long term, it helps alleviate constraints through the effects of green technological innovation. The analysis of heterogeneity demonstrates that the alleviation effect on financing constraints is particularly evident among large enterprises, firms in western regions, and companies in heavily polluting industries. This study offers new theoretical perspectives and policy implications for alleviating corporate financing constraints and advancing green low-carbon transformation.

Suggested Citation

  • Liu, Wenhao & Guo, Yingdong & Li, Shuhui, 2026. "The short-term pain and long-term gain of low-carbon policy for corporate financing," Economic Analysis and Policy, Elsevier, vol. 90(C), pages 834-850.
    • Handle: RePEc:eee:ecanpo:v:90:y:2026:i:c:p:834-850
    DOI: 10.1016/j.eap.2026.01.058
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