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Do green bonds reduce CO2 emissions? Evidence from developed and developing nations

Rupjyoti Saha (School of Commerce, XIM University, Bhubaneswar, India)
Santi Gopal Maji (Department of Commerce, Tezpur University, Tezpur, India)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 12 December 2023

719

Abstract

Purpose

The rapid global economic development in the last century, led by industrialization, brings environmental issues to the forefront as a serious concern. While some country-specific studies are undertaken to find the effectiveness of different mechanisms for funding environment-friendly projects, to the authors' knowledge, no study has been conducted to examine the impact of green bonds (GBs) on CO2 emissions for a global sample. Against this backdrop, this study examines the general impact of GBs on CO2 emissions and its differential impact for developed and developing countries and country categorizations based on sustainable development.

Design/methodology/approach

The study selects a sample of 44 countries from 2016–2020. The authors use trend analysis and box plots to analyze the present GBs and CO2 emissions scenarios. Further, the panel data regression model is used to examine the overall impact of GBs on CO2 emissions and uncover the variation in such relationships regarding country-level economic and sustainable development. Generalized methods of moments (GMM) and instrumental variables (IV) models are used for robustness.

Findings

The yearly trend of GBs is upward at the global level, while CO2 emissions exhibit a marginal decline during the study period. However, significant variations are observed in such trends between developed and developing countries and country-level sustainable development. The authors' regression results show that GBs significantly negatively impact CO2 emissions globally. In addition, the effect of GBs on CO2 emissions is strongly negative for developing countries, while the same influence becomes weak for developed nations. Similar variations exist between countries based on sustainable development.

Originality/value

This is the first study in extant literature to examine such a relationship for a global sample of 44 countries. Further, this study makes a novel contribution by analyzing the variations in the GBs-CO2 emissions nexus for developed and developing countries and country-level sustainable development.

Keywords

Citation

Saha, R. and Maji, S.G. (2023), "Do green bonds reduce CO2 emissions? Evidence from developed and developing nations", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-05-2023-0765

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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