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Carbon Pricing versus Green Finance

LASSE HEJE PEDERSEN

The Journal of Finance2026https://doi.org/10.1111/jofi.70022article
FT50UTD24AJG 4*ABDC A*
Weight
0.50

What the paper says

Green finance—including environmental, social, and governance investing and sustainable finance regulations—is widespread, but can it substitute for carbon pricing in fighting climate change? In a unified model, I show that (i) when carbon prices reflect the social cost of carbon, green finance should not be used; (ii) when carbon prices are too low, green finance can implement the social optimum if each firm's cost of capital can be set to its sustainable discount rate , which increases with the ratio of carbon emissions to firm value. I provide calibrations, analyze stranded assets, and present implementations through subsidies or preferential financing for green firms.

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https://doi.org/https://doi.org/10.1111/jofi.70022

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@article{lasse2026,
  title        = {{Carbon Pricing versus Green Finance}},
  author       = {LASSE HEJE PEDERSEN},
  journal      = {The Journal of Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/jofi.70022},
}

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Carbon Pricing versus Green Finance

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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