Green bonds and carbon emissions

This paper examines the relationship between green bonds (that is, bonds whose proceeds are committed to financing green projects) and carbon emissions at the aggregate level. Using data for US states, I find that the issuance of $1,000 of green bonds per capita is associated with a subsequent decrease in state-level emissions by 0.9-1.4 per cent. I obtain similar magnitudes using cross-country data. These results are stronger for green bonds that are certified by independent third parties, suggesting that certification is an important governance mechanism in the green bond market.