The Impact of Carbon Emission Trading Pilot Policy on the Cost of Corporate Debt Financing

Based on the data of A-share listed companies from 2010 to 2020, this paper regards the pilot of local carbon emissions trading as a quasi natural experiment, and uses a two-way fixed effect double difference model to investigate the impact of carbon trading policy on corporate debt financing costs. The results show that after the implementation of the pilot policy, the average debt financing cost of enterprises in the pilot area increased by about 0.71%, and remained stable in the replacement variable caliber, adjusted sample, placebo test and parallel trend test. The results of the mechanism show that the carbon trading pilot significantly depresses the cash holdings of enterprises, and the liquidity contraction increases the risk compensation requirements of creditors, which constitutes an important channel for policies to push up the cost of debt financing. Heterogeneity analysis further found that the rise in financing costs was mainly concentrated in non-state-owned enterprises and young enterprises. The research shows that the carbon market will generate observable short-term financing cost pressure in the pilot operation stage while forming long-term emission reduction incentives; Improving the financing support for enterprises' low-carbon transformation, improving the quality of carbon market information and implementing differentiated green financial policies will help reduce the liquidity constraints in the transformation process.