Abstract
The development of China’s coal power industry is accompanied by various environmental risks. In this paper, typical coal power enterprises are taken as examples to establish a tool for environmental cost internalization and environmental risk analysis under the risk constraints of energy efficiency standards, environmental protection tax, national carbon market, water resources tax, overcapacity and renewable energy substitution. The study considered the impact on the value of coal power companies under different stress scenarios and constructed a stress testing framework for environmental risks that affect financial costs. The results show that the impacts of overcapacity and carbon market on enterprise value for individual risks are the main risk drivers that most regions face in different scenarios. In the comprehensive risk stress test, the enterprise value of the 1000 MW ultra-supercritical units in each region was found to have a small difference from the corporate value of the reasonable return in the optimistic and pessimistic scenarios, while the 300 MW and 600 MW sub critical units were more likely to deviate from the reasonable return due to low energy efficiency and high operating costs. With continuous increase in the severity of environmental risks, the environmental stress test helps coal power companies and financial institutions understand the impact of environmental risks on the financial status of the company and thus influence investment decisions.
Highlights
Extreme weather and global warming is becoming more obvious
Due to the lack of information and incomplete assessment methods, many financial institutions are afraid to enter the green industry, because they are concerned about the uncontrollable green financial risks
It helps financial institutions to understand the impact of climate and environment policy changes on the financial situation of an enterprise, and guide them to reduce investments with enterprises that have high environmental risks [2]
Summary
Extreme weather and global warming is becoming more obvious. They seriously affect people’s lives, property security, and sustainable development of the economy and society, and have posed serious challenges to the survival and development of several countries. In order to form a good green financial development environment, it is necessary to establish public environmental data platforms and environmental stress-testing systems; those that can break the green investment and financing bottleneck caused by information asymmetry. The focus of China’s green financial development is on how to quantify environmental risk. It helps financial institutions to understand the impact of climate and environment policy changes on the financial situation of an enterprise, and guide them to reduce investments with enterprises that have high environmental risks [2]
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