This paper studies the financial 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. Using matched SBA loan-level data and industry-level energy usage in a triple difference-in-differences design, we find preemption laws improving credit supply—along both loan volumes and interest rates—for SMEs that are highly dependent on gas. Our results suggest that preemption laws relax transition risk, enabling gas-intensive firms to avoid green innovation, potentially delaying the clean energy transition. These findings underscore that the effectiveness of transition finance hinges on the political economy shaping subnational climate policy.
