Policy Research On Financial Support For Economic Green Transformatio

Climate change and environmental pollution could damage the ecology and human health,and increasingly significantly affect the economy and the stability of the financial system.Global climate change will change the climate patterns around the world,affecting such things as agricultural production in various places,the living patterns of residents in each region,and the urban infrastructure.On the one hand,financial policies should play an active role in enhancing green transition of the economy.On the other hand,economic and financial stability requires policymakers to pay more attention to the impact of climate and environmental shocks.This paper concludes 3 fundamental question to be answer by reviewing researches and practical progresses:(1)How financial policies should do to prevent from climate and environmental risks;(2)How financial policies should do to enhance economic green transition;(3)What effects are among the green financial policies’ enhancing economic green transition.This paper investigates these questions deeply.First,this paper investigates the role and optimization of conventional monetary policy in the context of green transition of the economy.The basic DSGE setting is in line with the standard New Keynesian framework.The basic “Environmental” features are introduced following Annicchiarico et.al.(2017)by incorporating the GHG emissions from production,their negative externality on productivity,and the climate policy that controls emissions,i.e.,cap-and-trade or carbon tax.To consider the environmental module in a more comprehensive way,this paper also introduces some novel environmental features into the model: the concealed emissions,the potential penalty for them,and the effectiveness(stringency)of climate policy enforcement.The conclusions are as follows:(1)Monetary policy can be influenced by climate policy since when it is mixed with different types and effectiveness(stringency)of climate policy,price level and inflation(which are the major target of monetary policy)in the economy are different.(2)The reaction coefficients in the traditional Taylor rule of monetary policy can always be better set to enhance welfare when the existing climate policy is considered in the framework of analysis.(3)The welfare of the economy can be enhanced by adding the target of emission gap into the rule of monetary policy and setting the reaction coefficient of the new target in a specific interval.Second,this paper establishes a direct technical change(DTC)endogenous growth model with environmental and financial factors as theoretical mechanism analysis.This paper firstly shows the specific roles of financial policy in supporting the green transition by giving and proving some formal propositions.This clarifies the mechanisms through which financial factors can play a role.Secondly,this paper numerically analyses the effect of green financial policy,which alleviates financial constraints,compared to subsidies to green production and innovation,and combinations of such instruments.This will show the advantages and disadvantages of green financial policy and help authorities identify better policies.Additionally,this paper conducts dynamic simulations of policy implementation with and without the COVID-19 shock under different policy settings.This will show what the pandemic would,and different policy mixes could bring to the green transition and recovery of the economy.This study finds that(1)Financial constraints are non-trivial in the economy and could delay the green transition if no additional policy is introduced.(2)Financial policy directionally supporting the green economic sector can facilitate the green transition and help stop the environmental degradation.(3)Financial policy can bring effects similar to what some other policies can do in supporting the green transition,and compared with related policy,financial policy has certain advantages and disadvantages so there is space for financial policy to mix with other policies to save cost and improve the effect.(4)A green recovery after the COVID-19 shock can be realized with an appropriate mix of financial policy and other related policies.Indeed,recovery from the pandemic also offers a window of opportunity to accelerate the policy-induced green transition by strengthening the green financial policy.Third,this paper analyzes the impact of the "Green Credit Guidelines" on the environmental performance of enterprises.This paper draws conclusions through empirical evidence:(1)After the introduction of the "Green Credit Guidelines",listed companies in the highpollution industries have achieved a greater degree of environmental spending than other companies.(2)When listed companies in the industries of high-pollution enterprises are faced with green credit policies’ financing restriction,they will increase their motivation for green technology innovation,thereby increasing their environmental investment.Finally,based on the analysis above,this article puts forward the following policy recommendations:(1)Continue to strengthen air pollution control,and focus on energy saving and emission-cutting;(2)Improve the policy system,especially focusing on the incentives for pollution reduction through a combination of policies from short-term compliance to long-term green transition;(3)Through various incentives for private enterprises to invest resources in energy-saving and emission-cutting technology and industrial green transition;(4)Explore various means to efficiently use government fiscal funds,and green financial policies for transition must be leveraged to long-term investment of private funds in green transition;(5)Mobilize scientific researchers in colleges,academia and universities to promote the progress of green transition technology;(6)Pay attention to the stability of the financial system,and enhance the ability to respond to the shock of physical risks and transition risks.