We study the effect of financial deepening on carbon dioxide (CO2) emissions intensity in a global sample of 125 economies from 1990 to 2019. Using the local projections (LP) approach, we find that financial deepening leads to a relative increase in CO2 emissions intensity, indicating that financial institutions tend to finance relatively more carbon-intensive investments and consumption. However, we also find that a better institutional environment mitigates this adverse effect of financial deepening: conditional LPs reveal that in countries with more environmental regulations, a stronger rule of law, and a financial system that is relatively more market- than bank-based, financial deepening does not lead to higher CO2 emissions intensity. Furthermore, our results show that stronger rule of law and higher relative financial market development mitigate the effect of financial deepening in countries, which already have lower CO2 emissions intensity. By contrast, tighter environmental regulations are more effective in countries with an initially higher carbon intensity.

This policy paper explores Vietnam’s carbon transition through three distinct scenarios, each shaped by technological advancements, policy frameworks, market dynamics, and societal shifts. The Current Policies/Planned Policy Scenario envisions continued reliance on the existing framework, balancing economic growth through infrastructure investments with challenges like dependency on natural gas and limited financial resources. The Successful Carbon Market Scenario highlights the role of a robust carbon trading market, supported by strong Monitoring, Reporting, and Verification systems, to drive emissions reductions, clean energy innovation, and low-carbon investments, while addressing issues of market integrity and equitable benefits. The Subsidy-Driven Green Transition Scenario, inspired by the U.S. Inflation Reduction Act, focuses on government-led efforts leveraging fiscal spending, tax credits, and incentives to accelerate renewable energy adoption and low-carbon technologies. Together, these scenarios offer diverse pathways and potential macroeconomic impacts for Vietnam’s shift to a low-carbon future.

This paper investigates the effects that science-based targets (SBTs) have on corporate greenhouse gas (GHG) emissions. Using a difference-in-differences (DiD) methodology, we assess whether companies that commit to a Net Zero goal show a decrease in GHG emissions compared to similar companies that declare such goals later. Our results provide limited evidence that organizations with SBT reduce emissions, particularly for Scope 1 and Scope 2 emissions, as the findings lack strong statistical significance. We also examine whether the pace of emission reductions increases as companies approach their target year. Our results indicate that efforts to reduce emissions increase before the announcement, but may stabilize thereafter. These results highlight the challenges of accurately assessing the tangible impact of voluntary corporate commitments on climate goals and underscore the need for comprehensive and clear reporting to prevent misleading claims and promote confidence in climate finance.