Abstract: Green bonds are often characterized as a promising market response to environmental challenges. Using hand-collected data on U.S. corporate and municipal issues, we find that proceeds are typically used to refinance existing debt, continue ongoing projects, or fund projects with green aspects consistent with prior activity. Fewer than 3% of proceeds support projects that are novel for the issuer. Further tests indicate investors do not differentiate between bonds financing more versus less novel uses. Overall, U.S. green bonds usually scale existing green activities rather than fund new ones.
Abstract: We develop and apply a framework to test for and measure green waste: the misallocation of public subsidies for green investment projects. Our context is a major Norwegian subsidy program to reduce carbon emissions. We apply the framework to detailed project-level data on
carbon emissions and subsidy amounts for both marginal and inframarginal projects. We find that the decision-maker could have achieved the same level of emission reductions at less than half the cost. To isolate the sources of this green waste, we use data on both ex-ante expected
and ex-post realized emission reductions for each project. We find that the decision-maker is able ex-ante to identify the projects with the highest ex-post emission reductions but unwilling to select them.
Discussant: Lucian Taylor, University of Pennsylvania
Abstract: We propose a novel macrofinance model for the EU area comprising climate damages, an Emission Trading System, and credit markets with (1) a bias for ‘net-zero’ brown firms, and (2) opaque voluntary carbon credit markets. Our model suggests that the implied allocation is far from the first-best. Relevant welfare gains can be obtained in a setting in which a Green Coin Central Bank (GCCB) runs a transparent blockchain in which coins are mined after a decentralized verification of private offsets, and the GCCB manages green coin prices through open market operations.
