Investment Rating - The report does not explicitly provide an investment rating for the industry analyzed Core Insights - Financial deepening, defined as the increase in bank credit relative to GDP, generally leads to a relative increase in carbon dioxide emissions per dollar of GDP across a sample of 125 economies from 1990 to 2019 [2][13][14] - A one-standard-deviation increase in credit-to-GDP results in an increase in CO2 emissions per dollar of GDP by approximately 0.6 percentage points over a five-year horizon, indicating that financial deepening can diminish the decline in CO2 emissions [13][33] - The adverse effects of financial deepening on carbon emissions can be mitigated by stronger institutional environments, including robust environmental regulations and a more market-based financial system [14][40] Summary by Sections Introduction - The transition to a less carbon-intensive economy requires significant investments, with estimates suggesting that global investments in climate mitigation need to rise from 5 trillion annually by 2030 [6] - Financial institutions, particularly banks, play a crucial role in directing funds towards green technologies or traditional carbon-intensive investments [7] Data and Methodology - The study utilizes an unbalanced panel dataset of 125 advanced and emerging economies covering the years 1990 to 2019, focusing on CO2 emissions per dollar of GDP and financial deepening measured by credit-to-GDP [16][18] - The empirical methodology employs local projections to assess the impact of financial deepening on CO2 emissions, allowing for the examination of responses over a five-year horizon [26][27] Results - The findings indicate that financial deepening contributes to a persistent increase in CO2 emissions per dollar of GDP, with the most significant effects observed in the first year following an increase in credit-to-GDP [33] - Conditional results reveal that countries with stronger environmental regulations and a higher rule of law index experience less increase in CO2 emissions per dollar of GDP due to financial deepening [35][37] - The analysis shows that the impact of financial deepening varies based on the initial carbon intensity of production, with different institutional factors playing a role in mitigating emissions [41][42] Robustness Checks - Various robustness checks confirm the baseline findings, including the use of alternative measures of financial deepening and focusing on credit boom episodes, which show even more pronounced adverse effects on CO2 emissions [47][49][52]
Financial Deepening and Carbon Emissions Intensity
世界银行·2024-10-16 23:03