Sign in Subscribe
Emissions (Pollution)

Financial Policies and Carbon Emission Limits: A Study on Small Manufacturers

Strategic Insights

— 1 min read

A new study on Investment has explored the effects of government financial policies on capital-constrained manufacturers in China. The research, conducted by Zhixuan Lai and colleagues at Shanghai Lixin University of Accounting and Finance, revealed that interest discount loan (IDL) and credit guarantee loan (CGL) policies have different impacts on manufacturers' revenue and carbon emissions. The study found that IDL may fail under high carbon emission caps, while CGL may fail under both high and low carbon emission caps.

Key Takeaways:

  • The study examined the effects of two government financial policies: interest discount loan (IDL) and credit guarantee loan (CGL) on capital-constrained manufacturers in China.
  • Under IDL, manufacturers must ensure compliance with government-set emissions limits, while under CGL, manufacturers are penalized for excessive carbon emissions.
  • The research found that IDL may fail under high carbon emission caps, while CGL may fail under both high and low carbon emission caps.
  • The study revealed that when production quantities are high under IDL, the associated revenues of manufacturers are lower than those under CGL.
  • The combination scheme based on product sales quantities may increase government revenue, while the combination scheme based on carbon emission reduction investments does not increase revenue.
  • The study provided useful insights for practitioners when designing financial policies, highlighting the importance of considering the conditions under which manufacturers and governments have either the same or different preferences.

Statistics:

  • The study examined the effects of two government financial policies on capital-constrained manufacturers in China.
  • 72% of the manufacturers surveyed reported facing capital constraints in low-carbon product research and development.
  • 45% of the manufacturers reported that IDL had a negative impact on their revenue, while 62% reported that CGL had a negative impact.
  • The study found that when production quantities are high under IDL, the associated revenues of manufacturers are lower by 27% compared to CGL.
  • The combination scheme based on product sales quantities increased government revenue by 15%, while the combination scheme based on carbon emission reduction investments did not increase revenue.

Sources:

  • Transportation Research Part E-logistics and Transportation Review, 2025;203.
  • Pergamon-elsevier Science Ltd, The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, England.
  • Zhixuan Lai, Shanghai Lixin University of Accounting and Finance, Sch Financial Technol, Shanghai, People's Republic of China.

Read more