The Impact of Carbon Market Mechanisms on Green Investment and Financial Risks: A Comparative Study of Guangdong, China, and New South Wales, Australia

Abstract

This article analyses the impact of the carbon market mechanism on green investment and financial risks by taking Guangdong Province, China and New South Wales, Australia, as examples. Carbon pricing and related policies are not only important tools for environmental governance, but also affect the investment decision-making, capital allocation and financial risk exposure of enterprises. Therefore, while promoting low-carbon transformation, the carbon market mechanism will also have a more direct impact on the financial market and enterprise management. This study adopts a qualitative comparative research design, mainly through literature review, policy text analysis and case comparison. Guangdong Province was selected as a typical case of the Regional Carbon Emission Rights Trading System (ETS). In contrast, NSW better reflects the characteristics of the policy mix, and its low-carbon transformation is also affected by the "security mechanism" at the Australian federal level, the state-level net zero emission target and the power infrastructure policy. The study found that the carbon market mechanism can promote the development of green investment by increasing the cost of high-emission activities, enhancing enterprises' expectations of low-carbon investment, and guiding more capital to clean technologies. However, at the same time, these mechanisms may also bring certain financial risks, such as fluctuations in carbon prices, revaluation of industry assets, uncertainty in policy implementation, and transformation pressures faced by enterprises. The comparison results show that Guangdong's policy model relies more on direct carbon market price signals, and affects the emissions and investment behaviour of enterprises through the carbon trading mechanism. New South Wales, on the other hand, attaches more importance to long-term policy guidance and supports low-carbon investment through net zero emission targets and infrastructure planning. This article believes that two aspects should be considered at the same time when evaluating carbon policy. On the one hand, it is necessary to examine its ability to promote green investment and capital flow to low-carbon fields; on the other hand, it is also necessary to pay attention to its ability to identify and manage financial risks in the process of low-carbon transformation.