Finance and Carbon Emissions

70 Pages Posted: 26 Sep 2019

See all articles by Ralph De Haas

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); KU Leuven

Alexander A. Popov

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: September, 2019


We study the relation between the structure of financial systems and carbon emissions in a large panel of countries and industries over the period 1990-2013. We find that for given levels of economic and financial development and environmental regulation, CO2 emissions per capita are lower in economies that are relatively more equity-funded. Industry-level analysis reveals two distinct channels. First, stock markets reallocate investment towards less polluting sectors. Second, they also push carbon-intensive sectors to develop and implement greener technologies. In line with this second effect, we show that carbon-intensive sectors produce more green patents as stock markets deepen. We also document an increase in carbon emissions associated with the production of imported goods equal to around one-tenth of the reduction in domestic carbon emissions.

Keywords: carbon emissions, financial development, financial structure, innovation

JEL Classification: G10, O4, Q5

Suggested Citation

De Haas, Ralph and Popov, Alexander A., Finance and Carbon Emissions (September, 2019). Available at SSRN: or

Ralph De Haas (Contact Author)

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

KU Leuven

Naamsestraat 69
Leuven, B-3000

Alexander A. Popov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

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