Nexus between carbon emissions and local debt risk: Evidence from China's prefecture-level cities

Abstract

Debt risk is an externality of carbon emissions in the greening transformation process. Based on panel data of 171 prefecture-level cities in China from 2012 to 2020, this article empirically analyzed the influence and mechanism of carbon emissions on local debt risk. The results can be concluded as follows: (1) Carbon emissions will significantly induce local debt risk. After considering the endogenous problem and serial robustness tests, the conclusions above are still valid. (2) Local debt risk itself has a cumulative expansion effect stimulate by carbon emissions. And carbon emissions will strengthen the depth of local debt risk with the increase of local debt risk. (3) The moderating impact of carbon emissions on local debt risk has heterogeneous characteristics, with different industrialization processes, developmental level of scientific and technological innovation, and corporate environmental management regulation. This article not only provides a new evidence for carbon emissions externality from local debt risk perspective, but also provides a useful reference for local governments to enhance debt risk governance, and orderly implement reduction action of carbon emissions.