Environmental Effects of Green Bonds and Other Forms of Financing in the European Union

Abstract

Prioritising the implementation of environmental policies is a cornerstone for European Union member states. While sharing common objectives, individual countries apply their own approaches to implementing and financing the sustainable development and green transition, considering the national economic characteristics. This raises the crucial question of the extent to which various funding sources contribute to the success of environmental policies. In the past decade, many instruments for financing sustainable development have emerged, with green bonds prominently positioned as a pivotal tool for directing financial flows towards the achievement of green objectives. This paper studies the relationship between the different instruments for financing, such as the availability of issued green bonds, the extent of total debt, economic development, fiscal instruments, and on the other hand the specific indicators used to evaluate the effects of implementing the environmental policies. The study focuses on the environmental policies of European Union member states and associated member states from 2015 to 2022, with the intent to examine the effect of policies on indicators like energy consumption, greenhouse gas emissions, and economic losses from extreme weather events. Through correlation analysis, the study aims to specify the direction and significance of the influence of each independent variable on the dependent indicators. The findings reveal that green bond financing serves as a catalyst for positive changes in reducing energy consumption and carbon emissions, while general government debt emerges as a significant factor in financing environmental policies.