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How does China's decarbonization policy influence the value of carbon-intensive firms?

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  • Liu, Peizhi
  • Qiao, Haishu

Abstract

This paper studies carbon asset stranding risks under climate policy. We leverage the financial data of listed companies between 2005 and 2020 to exploit the development of China's decarbonization policy aimed at reducing carbon emissions and analyze its effect on the valuation of carbon-intensive firms. The results find that stranding risks are noticed, and the valuation of high-carbon companies is reduced compared to low emitters under China's decarbonization policy. This response exhibits a five-year cyclical fluctuation. Mechanistic evidence points to raising credit risks and increasing debt costs as major channels.

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  • Liu, Peizhi & Qiao, Haishu, 2021. "How does China's decarbonization policy influence the value of carbon-intensive firms?," Finance Research Letters, Elsevier, vol. 43(C).
    • Handle: RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321002221
    DOI: 10.1016/j.frl.2021.102141
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    Cited by:

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    3. Ren, Yi-Shuai & Boubaker, Sabri & Liu, Pei-Zhi & Weber, Olaf, 2023. "How does carbon regulatory policy affect debt financing costs? Empirical evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 77-90.
    4. Ding, Hao & Ji, Qiang & Ma, Rufei & Zhai, Pengxiang, 2022. "High-carbon screening out: A DCC-MIDAS-climate policy risk method," Finance Research Letters, Elsevier, vol. 47(PA).
    5. Han Wang & Yujie Jin & Xingming Hong & Fuan Tian & Jianxian Wu & Xin Nie, 2022. "Integrating IPAT and CLUMondo Models to Assess the Impact of Carbon Peak on Land Use," Land, MDPI, vol. 11(4), pages 1-16, April.
    6. Liu, Zhonglu & Pang, Tengfei & Sun, Haibo, 2024. "Decarbonization policy and high-carbon enterprise default risk: Evidence from China," Economic Modelling, Elsevier, vol. 134(C).
    7. Ren, Yi-Shuai & Derouiche, Imen & Hassan, Majdi & Liu, Pei-Zhi, 2024. "Do creditors price climate transition risks? A natural experiment based on China's carbon emission trading scheme," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 138-155.

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