This paper analyses the role of climate and environmental policy for the relationship between firms' environmental externalities and their cost of debt using data on European corporate bonds. For direct environmental costs as well as for carbon emissions, we find that policy is a key driver of...

Across the globe climate policy is shifting away from a carbon price towards investment subsidies, such as grants, interest-subsidised loans or guarantees. This increases the risk of inefficient public spending. This paper shows how the main market imperfections related to the emission...