1. Introduction
ㅇThis study offers essential insights into environmental economics, highlighting the importance of integrating firms‘ voluntary abatement efforts encouraged by sustainable finance, into the framework of optimal environmental regulation. It makes a significant contribution to the literature by examining the interplay between traditional environmental policy and sustainable finance.
ㅇMethodological Approach:
-The study commences with an exhaustive literature review focused on optimal environmental regulation. This review encompasses an examination of issues associated with the second-best setting, focusing on environmental taxes.
-Theoretical Analysis: The study advances with a theoretical analysis of the impact of sustainable finance on firm behavior. This segment entails a thorough exploration of how sustainable finance influences firms‘ decisions in optimizing production and emissions for profit maximization.

2. Optimal Environmental Regulation
ㅇChapter 2 provides a thorough examination of optimal environmental regulation, covering both its theoretical basis and practical applications.
-The chapter discusses the challenges in implementing optimal environmental regulation effectively, focusing on issues such as asymmetric information, the interaction with existing tax systems, and the importance of technological innovation in addressing environmental issues.
ㅇThe chapter examines the concept of a “second-best“ setting, where ideal market efficiency conditions are not present. This part highlights the complexities and necessary considerations for formulati