Pricing Green Bonds Under Externalities: How do market signals and government intervention affect project emission reduction and bond pricing?

Key Points

• Bond pricing is significantly influenced by both externalities and government intervention, impacting project emission reduction efforts.
• Analysis shows that effective market signals can enhance the pricing of green bonds, promoting sustainable investments.
• Using economic modeling, this analysis assesses how government policies interact with market dynamics regarding green bonds.
• Findings suggest that better regulatory frameworks can optimize emission reduction outcomes associated with green bonds.