Volume 47

Green Bonds and Urban Carbon Emission Reductions: An Analysis of Impact in Chinese Cities Baihua Dong, Xi Liang, Yi Wu, Mengfei Jiang

Abstract

Green bonds are a rapidly expanding and important green financing tool, but their impact on carbon emission reduction remains in question, particularly at the more granular level of cities. This study examines the relationship between green bonds and emission mitigation at the city level, using data on green bond issuance in 226 Chinese cities from 2006 to 2019. The findings reveal a positive correlation between the issue of green bonds and urban decarbonization, while this positive correlation is not uniformly observed in regions with relatively poor economic development, limited technological innovation and outdated industrial structure. This indicates that green bonds do not help those most in need. Furthermore, no significant mediating or moderating effects of urban industrial structures and technological innovation have been observed, suggesting that the current size and quality of green bond market is not enough to bring about changes in the industrial structure and low-carbon innovation. We also identify urban energy structure and related green finance policy such as Low-Carbon City pilot policy can jointly enhance the mitigation effect of green bond. In this regard, policymakers should take into account the variations among regions and the coordination between policies. Green bonds need to improve their role in reducing financing costs and risks for green projects, allowing funds to be directed to areas where they are most needed.

Keywords Green bond, green finance, Effectiveness, Carbon emission, Mitigation effect, Urban decarbonization