The role of green bond in improving energy efficiency

Abstract

The progress of achieving United Nations Sustainable Development Goals has garnered significant attention recently, with a growing recognition of the importance to improve energy efficiency. This paper therefore aims to address the question of whether and how green bonds promote energy efficiency (quantified as energy intensity) using panel data from 22 countries which are pioneers in issuing green bonds continuously from 2016 to 2022. A range of econometric techniques are employed in this study, including Feasible Generalized Least Squares and System Generalized Methods of Moments, to explore the relationships between the energy efficiency and green bonds as well as other other explanatory variables (carbon emissions, trade openness, urbanisation and population). The empirical results indicate that green bonds and urbanization effectively reduce energy intensity and thus could help accelerate the progress of improving energy efficiency while carbon emission and trade openness upsurge the energy intensity in the selected countries. Consequently, this paper suggested that governments should take action to economize on energy use by facilitating green bond issuance, reducing carbon emission and adopting policies to effectively utilize the opportunity of energy transition in world of liberalization.