Green finance and decarbonization: Evidence from around the world

This paper studies the effect of green finance on decarbonization. Using a large sample of 46 countries, we show that green finance significantly reduces carbon emissions in the short and long run. This effect is driven by green bonds issued to support waste and pollution control and improve energy efficiency. The impact of green finance on carbon emissions is more pronounced in developed credit markets and economies with higher innovation success and higher climate change exposure. Our results are robust under the conditions of short-run and long-run homogeneity and the cross-sectional dependence in the sample.

Automated summary

This paper examines the impact of green finance on decarbonization and finds that it significantly reduces carbon emissions in both the short and long term. This effect is driven by the issuance of green bonds to support waste and pollution control and improve energy efficiency. The impact of green finance on carbon emissions is more pronounced in developed credit markets and economies with higher innovation success and higher climate change exposure.