This paper studies the interaction of regulatory and capital market tools for pricing and reducing carbon emissions. We present a linear model in which standard and environmentally-oriented entrepreneurs can adopt polluting and non-polluting technologies, with the latter being less profitable...

This paper studies the conditions under which debt securities that make the cost of debt contingent on the issuer's carbon emissions, similar to sustainability-linked loans and bonds, can be equivalent to a carbon tax. The paper proposes a model in which standard and environmentally-oriented...