Abstract: Green bonds are viewed as a “real” capital market response to environmental issues. Our evidence indicates that most U.S. corporate and municipal green bond proceeds are used to refinance ordinary debt, continue existing projects, or initiate projects with green aspects that do not go beyond the issuer’s norm. Only around 2% of proceeds initiate projects with distinctly novel green aspects for the issuer. Investors and market participants also do not appear to distinguish between green bonds with more or less novel uses, as indicators such as offering yields, announcement effects, green bond index inclusion, and green bond fund holdings do not vary according to the novelty of use.
Abstract: We test for and measure green waste: the misallocation of public subsidies for green investment projects. Our context is a major Norwegian program for green investment subsidies. We develop a model of subsidy allocation and apply it to detailed project-level data on carbon emissions and subsidy amounts for both marginal and inframarginal projects. We find that decision-makers 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 decision-makers are 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.
