Essays in climate finance

Tang, Yanhuan (2024) Essays in climate finance. PhD thesis, London School of Economics and Political Science.

Text - Submitted Version Download (2MB)

Abstract

This thesis explores the role of finance in facilitating a transition to a greener economy and the impact of climate risks on markets and corporations. The first chapter examines how firms respond to transition risks by focusing on the EU Emissions Trading System (EU ETS) and its impacts. Leveraging the EU ETS’s inclusion criteria and subsequent regulatory tightening, a fuzzy regression discontinuity and a difference-in-differences analysis reveal two types of spillovers: emission spillovers, as firms shift emissions across supply chains, and technology spillovers, as firms increase their technological activities following stricter regulations. The second chapter investigates the pricing of building insurance, a critical market for climate adaptation. It studies the price dispersion of building insurance policies on a UK price comparison website. Using real property data and fictitious customer profiles, the study obtained quoted annual price data from the website and documented that, even after controlling for differences in policy features, individual customers still face considerable price dispersion, and the degree of dispersion varies significantly across customers. This dispersion is partially explained by customers’ preferences for certain providers. Further analysis indicates that variations of risk pricing strategies across providers and the use of randomized pricing strategies also contribute to the observed price dispersion patterns. The third chapter assesses whether corporate green bonds could improve the greenness of the economy. A simple theoretical framework shows that one potential channel for green bonds to make the world greener is through their use by financially constrained firms as a commitment device. However, empirical evidence shows that current issuers are typically less financially constrained and already greener than non-issuers. This suggests that green bonds may not significantly influence firms’ environmental behaviors under current market conditions.

Item Type:	Thesis (PhD)
Additional Information:	© 2024 Yanhuan Tang
Library of Congress subject classification:	H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce Q Science > QC Physics
Sets:	Departments > Finance
Supervisor:	Paravisini, Daniel and Agrawal, Ashwini
URI:	http://etheses.lse.ac.uk/id/eprint/4813

Actions (login required)

Record administration - authorised staff only