Firms are profit maximizers. So charging companies for the costs associated with the societal and environmental carbon pollution they cause would disincentivize their high carbon emission. Banks credit represents the main source of funding for firms. Thus, imposing higher financing costs to polluting as opposed to non-polluting firms should encourage lowering carbon emission. Within this scenario, it would be then the government responsibility to adopt policies which regulate banks’ financing of firms. Using sequential game model, system dynamics model, and panel data method, the project investigates how government could reduce firms carbon emissions through financial intermediation.