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Does energy efficiency of UK SMEs affect their access to finance?

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  • Chen, Jingyuan
  • Calabrese, Raffaella
  • Cowling, Marc

Abstract

To effectively mitigate climate change, a crucial focus area is enhancing energy efficiency in firms and industries. This objective becomes even more imperative in light of the recent escalation in energy prices caused by the Russo-Ukrainian war. Given the limited financial resources of Small and Medium Enterprises (SMEs), facilitating their access to finance becomes a potential avenue for reducing carbon emissions. Based on our knowledge, this is the first study that analyses the potential impact of energy efficiency on access to finance for SMEs in the UK. We consider a dataset of 2855 UK firms from 2015 to 2021 collected from the Longitudinal Small Business Survey. We find that energy efficient companies and firms that show energy saving behaviours are facing fewer credit constraints. These results are robust if we control for several company characteristics, including age, size, turnover, industry, location, and legal status.

Suggested Citation

  • Chen, Jingyuan & Calabrese, Raffaella & Cowling, Marc, 2024. "Does energy efficiency of UK SMEs affect their access to finance?," Energy Economics, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323007491
    DOI: 10.1016/j.eneco.2023.107251
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    More about this item

    Keywords

    Small and Medium Enterprises (SMEs); Energy efficiency; Access to finance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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