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Promoting energy conservation in manufacturing through sustainable insurance

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  • Chen, Shi
  • Chen, Dong
  • Lin, Jyh-Horng

Abstract

Motivated by the imperative of advancing environmental sustainability through green financing, this study delves into the transformative impact of technological advancements. Employing a novel, capped call-option model, this study assesses the interplay between financial technology for sustainable insurance and production technology for energy saving. This capped option encompasses lending-borrowing elements, including the financial and production technologies and carbon-allowance transactions within the cap-and-trade mechanism dedicated to environmental improvement. The investigation underscores the far-reaching effects of stringent regulatory caps, revealing substantial implications for manufacturing entities' equity value and risk. Such regulations may take a toll on borrowing manufacturers, deterring their engagement in energy-saving initiatives for cleaner production. Furthermore, this study sheds light on the dynamics of energy-saving practices, emphasizing that both technology-intensive production and financial technologies contribute to manufacturers' heightened equity risk. Interestingly, sustainable insurance initiatives, while well-intentioned, might inadvertently hinder progress in energy saving. Despite both fund providers' and borrowing manufacturers’ engagement in technology-intensive solutions for environmental improvement, the findings suggest that prioritizing progress in technology-intensive production technology for energy saving holds greater promise for advancing cleaner production. This potential replacement is especially significant for low-carbon emitters compared to their high-carbon counterparts, highlighting the nuanced dynamics at play in fostering a sustainable and energy-efficient future.

Suggested Citation

  • Chen, Shi & Chen, Dong & Lin, Jyh-Horng, 2024. "Promoting energy conservation in manufacturing through sustainable insurance," Renewable and Sustainable Energy Reviews, Elsevier, vol. 204(C).
    • Handle: RePEc:eee:rensus:v:204:y:2024:i:c:s1364032124005434
    DOI: 10.1016/j.rser.2024.114817
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    References listed on IDEAS

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