Financing Low-Carbon Transitions through Carbon Pricing and Green Bonds

Heine, Dirk; Semmler, Willi; Mazzucato, Mariana; Braga, João Paulo; Flaherty, Michael; Gevorkyan, Aleksandr V.; Hayde, Erin Kate; Radpour, Siavash

doi:10.3790/vjh.88.2.29

Cited by 40 publications

(53 citation statements)

References 37 publications

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“…These measures will ameliorate the plights of the poor due to the exacerbated inequalities created by economic growth. Heine et al (2019) in their recent paper said, transitioning to a low-carbon economy and therefore, mitigating climate change impacts demand the adoption and utilization of carbon pricing and green bonds. They argued the integration of these approaches would yield desirable outcomes that are political feasibly and environmentally sustainable.…”

Section: Literature Reviewmentioning

confidence: 99%

Nexus between green finance and climate change mitigation in N-11 and BRICS countries: empirical estimation through difference in differences (DID) approach

Nawaz

Seshadri

Kumar

et al. 2020

Environ Sci Pollut Res

282

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Green finance is inextricably linked to investment risk, particularly in emerging and developing economies (EMDE). This study uses the difference in differences (DID) method to evaluate the mean causal effects of a treatment on an outcome of the determinants of scaling up green financing and climate change mitigation in the N-11 countries from 2005 to 2019. After analyzing with a dummy for the treated countries, it was confirmed that the outcome covariates: rescon (renewable energy sources consumption), population, FDI, CO 2 , inflation, technical corporation grants, domestic credit to the private sector, and research and development are very significant in promoting green financing and climate change mitigation in the study countries. The probit regression results give a different outcome, as rescon, FID, CO 2 , Human Development Index (HDI), and investment in the energy sector by the private sector that will likely have an impact on the green financing and climate change mitigation of the study countries. Furthermore, after matching the analysis through the nearest neighbor matching, kernel matching, and radius matching, it produced mixed results for both the treated and the untreated countries. Either group experienced an improvement in green financing and climate change mitigation or a decrease. Overall, the DID showed no significant difference among the countries.

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Section: Literature Reviewmentioning

confidence: 99%

Nexus between green finance and climate change mitigation in N-11 and BRICS countries: empirical estimation through difference in differences (DID) approach

Nawaz

Seshadri

Kumar

et al. 2020

Environ Sci Pollut Res

282

View full text Add to dashboard Cite

show abstract

“…Further, the benefi ts of a joint use of CO 2 pricing and green investments are starting to become common knowledge in scientifi c research. For example, Heine et al (2019) argue that public green bonds are more effective when combined with a carbon tax.…”

Section: Climate Policymentioning

confidence: 99%

“…The private sources for funding green investment are numerous in principle: self-fi nancing, corporate bond issuing, bank loans, crowdfunding and stock issuance. However, public green bonds are most likely, by far, the most important and the most effective instrument for initiating and accelerating the great green transition (Heine et al, 2019).…”

Section: Specifi C Areas For Action To Foster the Great Green Transitionmentioning

confidence: 99%

Great Green Transition and Finance

2020

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Great Green Transition and Finance European governments are struggling to regain economic strength in the coronavirus pandemic as in many countries the number of new infections seems to gradually subside. Growth rates deep in the red call for a reconstruction programme when the crisis is fi nally manageable and economic activity can resume. Amidst this, there are again infl uential groups that claim "this is not the time to insist on strict climate protection goals". On the contrary, the ongoing COVID-19 crisis has clearly illustrated what climate disasters, often occurring locally, could do to the life of citizens. The reconstruction programme needs to initiate the great green transition. The transformation from a climate-distorting to a climate-protecting economy opens up investment opportunities and points to fi nancing needs comparable with those necessary for the rebuilding of the European economy after World War II. The great green transition is a unique chance to pursue policies for a new and sustainable growth regime.

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“…New green investments can be fostered by decreasing the interest rate paid on the debt (e.g., de-risked green bonds) but also by reducing the future operating cost (e.g., subsidies to decrease operational cost). Although carbon pricing can induce low-carbon transition, high capital and upfront costs demand the combination of green bonds and carbon taxation as de-risking instruments (Steckel & Jakob, 2018;Heine et al, 2019), since an increasing scale is likely to lead to decreasing cost, see Figure 1. We adapt the model to verify the effect of de-risking bonds (or not) in an economy in which the Government taxes the carbon industry and provides subsidies for renewable energy activities.…”

Section: Case 3: De-risked Bonds and Green Fiscal Reformmentioning

confidence: 99%

“…3 A discussion about the interaction of carbon taxation and green bonds is also set by Heine et al (2019) and Steckel & Jakob (2018).…”

Section: Introductionmentioning

confidence: 99%

De-risking of Green Investments through a Green Bond Market: Empirics and a Dynamic Model

2020

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A substantial increase of green investments is still required to reach the Paris Agreement's emission targets. Yet, capital markets to expedite green investments are generically constrained. Literature has shown that governments could de-risk such investments. Empirical beta pricing and yield estimates reveal some public involvement in the green bonds market, especially for long maturity bonds. We provide empirical evidence that Governments and Multilateral organizations can de-risk green investments by supporting the issuance of green bonds in contrast to private green bonds-that show higher yields, volatility and beta prices-and conventional energy bonds, that are more volatile due to oil price variations. Since lower betas also mean lower capital costs, we use those empirical results and run a dynamic model with two types of firms, modeling the economic behavior of innovators (renewable energy firms) and incumbents (fossil fuel firms). The simulations of our model show that de-risked interest rates help to phase in renewable energy firms in the market and avoid a sharp debt increase. However, when the new entrants carry negative pay-offs for a longer time, it might not be sufficient to keep the debt low and to avoid a shake-out in the market. Subsidies and carbon taxation can complement the role of the de-risked interest rates and expedite the energy transition. Beside deterministic model variants, we also explore a stochastic version of the model.

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Financing Low-Carbon Transitions through Carbon Pricing and Green Bonds

Cited by 40 publications

References 37 publications

Nexus between green finance and climate change mitigation in N-11 and BRICS countries: empirical estimation through difference in differences (DID) approach

Nexus between green finance and climate change mitigation in N-11 and BRICS countries: empirical estimation through difference in differences (DID) approach

Great Green Transition and Finance

De-risking of Green Investments through a Green Bond Market: Empirics and a Dynamic Model

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