Abstract

This paper studies the financial and real consequences of state-level laws that preempt future municipal bans on gas infrastructure. Preemption laws are more likely to pass in politically conservative states with weak climate-policy support, highlighting the ideological roots of climate policy retrenchment. Leveraging SBA loans and novel SME energy-use data in a triple difference-in-differences design, we find that preemption laws increase lending to gas-dependent firms through both larger loans and lower rates. Exploiting the guarantee fee discontinuity as additional identification, we show that strategic bunching relaxes for gas-intensive borrowers, consistent with reduced transition risk. We then document real effects, with employment gains concentrated in SME-intensive and highly gas-exposed sectors. Our results underscore how political economy shapes the effectiveness of transition finance.

To the publication:  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6514721