Marc Wouters

2025

Amid global trade integration and industrial decarbonization, carbon accounting frameworks have evolved from
policy compliance and disclosure instruments into financial mechanisms that directly affect corporate cash
flows. This study develops a classification of five framework types—Technical Standards, Market-Based
Mechanisms, Tax-Based Mechanisms, Border Adjustment Mechanisms, and Disclosure-Oriented Mechanisms,
while identifying their respective cash flow transmission pathways. Using cross-industry, multi-regional firmlevel
data and a Two-Way Fixed Effects model, the analysis examines how these pathways influence emission
reduction outcomes. The findings show that Market- and Tax-based mechanisms primarily affect emissions
through direct cash flows, such as allowance trading and tax payments, whereas Disclosure-Oriented
Mechanisms operate indirectly via channels such as green financing. The study highlights the tension between
short term financial burdens and long term incentives for low-carbon transition, offering insights for corporate
financial planning and climate policy design.