{"title":"Adoption of green technology with financial friction","authors":"Fabian Herweg","doi":"10.1016/j.frl.2024.106388","DOIUrl":null,"url":null,"abstract":"<div><div>We investigate firms’ incentives to adopt green technology. To cover the adoption costs, a firm needs a bank loan. The bank cannot observe firms’ adoption costs and offers a loan contract that allows it to earn an intermediation margin. The Pigouvian tax leads to optimal abatement but inefficiently low adoption. The first-best outcome is achieved via a combination of environmental tax and loan subsidy. If the regulator is restricted to an environmental tax, it faces a trade-off between optimal adoption and optimal abatement. In this case, the second-best tax rate exceeds the Pigouvian tax rate.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106388"},"PeriodicalIF":7.4000,"publicationDate":"2024-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S154461232401417X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate firms’ incentives to adopt green technology. To cover the adoption costs, a firm needs a bank loan. The bank cannot observe firms’ adoption costs and offers a loan contract that allows it to earn an intermediation margin. The Pigouvian tax leads to optimal abatement but inefficiently low adoption. The first-best outcome is achieved via a combination of environmental tax and loan subsidy. If the regulator is restricted to an environmental tax, it faces a trade-off between optimal adoption and optimal abatement. In this case, the second-best tax rate exceeds the Pigouvian tax rate.
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