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Green technology choices under the cap-and-trade mechanism with insurer green finance in a dragon-king environment

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  • Chen, Shi
  • Huang, Fu-Wei
  • Lin, Jyh-Horng

Abstract

The article investigates an insurer's green finance toward sustainability by explicitly capping borrowing-firm credit risk. The borrowing firms participate in the cap-and-trade mechanism and conduct green technology choices in a dragon-king environment due to confluent climate changes. The policy surrender incurs in the insurer's asset-liability matching management. The model can explore the effects of the borrowing-firm green trades and green technology choices on the insurer's performance. We show that the dragon-king impact and the policy surrender reduce the optimal guaranteed rate of the life insurance policies and policyholder protection. The stringent regulatory cap of the cap-and-trade mechanism decreases the insurer's profits and hurts policyholders. Green technology employed by the high‑carbon-emission borrowing firm reduces the insurer's profits; however, it helps protect policyholders, contributing to insurance stability. One implication is that the government might improve environmental sustainability directly through the borrowing-firm production rather than from the fund-providing perspective.

Suggested Citation

  • Chen, Shi & Huang, Fu-Wei & Lin, Jyh-Horng, 2023. "Green technology choices under the cap-and-trade mechanism with insurer green finance in a dragon-king environment," Energy Economics, Elsevier, vol. 117(C).
    • Handle: RePEc:eee:eneeco:v:117:y:2023:i:c:s0140988322006193
    DOI: 10.1016/j.eneco.2022.106490
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    Cited by:

    1. Li, Xuelian & Chen, Lingzhi & Lin, Jyh-Horng, 2023. "Cap-and-trade mechanisms, green technology investment, and shadow insurance in a black swan environment," Energy Economics, Elsevier, vol. 124(C).

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    More about this item

    Keywords

    Dragon king; Cap-and-trade mechanism; Green technology; Insurer green finance;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • 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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