IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v148y2025ics0140988325005171.html
   My bibliography  Save this article

Counting the carbon burden: Evidence from municipal bonds in China

Author

Listed:
  • Li, Yi
  • Li, Yang
  • Wang, Zhaohua

Abstract

This paper examines how carbon emissions affect municipal corporate bond (MCB) pricing in China. Using data from 2008–2022, we find that higher emissions lead to wider credit spreads. To address endogeneity, we use a difference-in-differences strategy and an instrumental variable approach, both confirming the results. Mechanism analysis shows that carbon emissions widen credit spreads by weakening implicit guarantees, reducing repayment capacity, and lowering investor demand. The effect is stronger in developed cities, those with limited refinancing capacity, lower marketization, lower fiscal transparency, and after 2020. These findings highlight the financial implications of environmental risk in municipal bond markets.

Suggested Citation

  • Li, Yi & Li, Yang & Wang, Zhaohua, 2025. "Counting the carbon burden: Evidence from municipal bonds in China," Energy Economics, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:eneeco:v:148:y:2025:i:c:s0140988325005171
    DOI: 10.1016/j.eneco.2025.108690
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988325005171
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2025.108690?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • 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
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:148:y:2025:i:c:s0140988325005171. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.