Methane Emissions and Financial Structures - The role of Finance in mitigating Environmental Degradation
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2021-07-07
Language
en
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Abstract
Inspired by the empirical work of De Haas and Popov (2021), this thesis examines how the financial
structure of countries – bank-based versus market-based financial systems – affects their aggregate
emissions of methane (CH4). Conducting a fixed effects analysis on a 105-country panel over the
period of 1990-2012, the data shows that, while holding both economic and financial development
constant, per capita CH4 emissions are significantly higher (lower) in economies with deeper stock
(credit) markets. An explanation for this finding may be that (ordinary) equity investors are to a lesser
extent aware of methane’s detrimental impact on the world’s environment than (often well-informed)
financial intermediaries, consequently being less capable to stimulate methane-intensive firms to lower
their emissions of the gas. Importantly, this finance-methane link also survives the inclusion of an
additional controlling factor for the stringency of countries’ environmental regulation and is robust to
multiple alternative measurements. Moreover, by documenting these results alongside the finance-CO2
link as studied by De Haas and Popov (2021), it is shown that both the per capita emissions of CO2
and CH4 need to be accumulated if one wants to come up with valid implications regarding the
association between conventional finance and environmental degradation in genera
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Faculteit der Managementwetenschappen