Green Bonds as Catalysts for Change: Driving CO₂ Reduction and Sustainable Finance across Europe

Hanna Kociemska; Sylwia Frydrych

doi:10.18778/2391-6478.3.51.03

Authors

Hanna Kociemska Wroclaw University of Economics and Business https://orcid.org/0000-0003-3421-6574
Sylwia Frydrych SGH Warsaw School of Economics https://orcid.org/0000-0002-1215-4950

DOI:

https://doi.org/10.18778/2391-6478.3.51.03

Keywords:

CO₂ emissions, sustainability, European Countries, panel data analysis

Abstract

The purpose of the article. The growing importance of sustainability and climate change mitigation has spurred a rise in green bond issuance across the European Union (EU). However, questions remain about the long-term effectiveness of these instruments in reducing CO₂ emissions, particularly given economic, governance, and environmental factors such as GDP and forest cover. Understanding the dynamics of various types of green bonds, including certified and self-labelled bonds, is essential for assessing their role in promoting sustainable development.

Methodology. Methodology/approach: the study aims to assess the relationship between green bond issuance and CO₂ emissions reduction in 25 EU countries from 2007 to 2022. It evaluates how different types of green bonds, including Climate Bonds Initiative (CBI)-aligned and social green bonds, contribute to decarbonization, considering factors such as governance quality, economic performance, and natural infrastructure. The research employs descriptive statistics, correlation analysis, and fixed- and random-effects panel data models.

Results of the research. Findings/implications: The results reveal that CBI-aligned green bonds have a statistically significant impact on reducing CO₂ emissions, with coefficients indicating an 8.5% reduction for a 1% increase in bond value. Self-labelled green bonds exhibit greater variability in effectiveness due to limited certification. Social green bonds have minimal impact on CO₂ emissions reductions, reflecting their broader focus on both environmental and social goals. Economic indicators, such as GDP per capita and forest cover, positively moderate the relationship between green bonds and emissions reduction, underscoring the importance of institutional capacity and natural carbon sinks in achieving sustainability goals.

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