What effect did the Green Credit Policy have on China's energy or emission intensive firms?

Abstract

PurposeThe role of energy or emission intensive firms face contradictory demands from advancing economic development and environmental improvement and protection and thus require appropriate policy interventions to balance the two needs. China's “Green Credit” policy that restricts loans to energy or emission intensive firms provides an example to study the impact of these kinds of policy intervention.Design/methodology/approachUsing the data of all A-share listed companies in Shanghai and Shenzhen stock exchanges, our paper empirically analyzes the impact of the Green Credit Policy on performance of these energy or emission intensive firms.Findings(1) Using difference-in-difference (DID) and propensity score matching (PSM)-DID method and the dynamic effect method, we found that from 2012 to 2015, the Green Credit Policy had an inhibiting effect on the performance of energy or emission intensive firms. This inhibiting effect was gradually weakened in 2016, and it turned into a positive promoting effect in 2017; (2) The performance's change of these firms around 2015 showed that Green Credit promoted the green transformation and upgrading of these firms; (3) Loans were helpful to the performance of energy or emission intensive firms to some extent, but government subsidies were not significant.Originality/valueThe results suggest that the government, banks and other institutions should dynamically assess the implementation results of the Green Credit Policy on energy or emission intensive firms.

Can the green credit policy stimulate green innovation of heavily polluting enterprises in China?

“…For example, Peng and Zheng (2021) have found that green finance significantly improves energy efficiency, regional resources, economic development, and the degree of marketization all of which influence this significant positive effect. Zhang Q et al (2021) have confirmed that GCGs are essential in mitigating sulfur dioxide and wastewater emissions. Tian et al (2022) have found that by directing the flow of funds, green credit policies can support green technology innovation in heavy polluting industries, thus supporting the development of green industries while curbing emissions from polluting industries.…”

“…For example, Liu et al (2022) demonstrated that the Chinese energy sector receives an overall excessive level of green investment (overinvestment) when compared with the estimated optimal investment level. Zhang Q. et al (2021) found that GCGs affect the size of loans to environmentally friendly manufacturing firms, with small-and medium-sized firms receiving more loans than larger ones. Liu et al (2019) have confirmed that the debt financing capacity in heavily polluting enterprises significantly reduces because of the GCGs.…”

“…China's green credit policy started late. It was first introduced in 2007 in the Opinions on the Implementation of Environmental Protection Policies and Regulations to Prevent Credit Risks, jointly issued by the former State Environmental Protection Administration, the People's Bank of China, and the former China Banking Regulatory Commission (Zhang Q et al, 2021), and then, the China Banking Regulatory Commission issued the Green Credit Guidelines (GCGs) in 2012 to guide the banking financial institutions in the development of green credit services and evaluating their effectiveness. It was the first nationwide policy and a landmark.…”

DataSheet1.docx

“…The effect of environmental regulations on GTFP is studied using the linear probability and the proportional hazards models (Ai et al, 2020), systematic generalized estimation method (GMM), dynamic count data model (Bitat, 2018), difference-in-difference (DID) model (Zhang et al, 2021), bootstrap panel Granger causality test (Liu et al, 2021), spatial model (Peng, 2020) and evolutionary game theory (Ulph, 2000). It is concluded that environmental regulations have an "innovation compensation effect," thus, increasing productivity.…”