What impacts do green bonds have on carbon emissions and how? A dynamic spatial perspective in China

Green bonds are adopted to exclusively finance or refinance green projects and thus is an important policy instrument for sustainable development. The development of these eco-friendly projects benefits the reduction of carbon emission. What impacts do green bonds have on carbon emission intensity and how? This issue needs to be revealed, including the dynamic spatial interactive rules and regional heterogeneity. This is especially true for China, with its vast territory and a short history of green bonds. Different with existing literature, this paper collects the data of the amount of green bond issued in each province in China rather than the policy dummy variable of green bond. The spatio-temporal interactions of both the impact of green bonds and the related mechanisms are studied. A dynamic spatial Durbin model (DSDM) combined with a STIRPAT (Stochastic Impacts by Regression on Population, Affluence and Technology) model reveals the negative impacts of green bonds on carbon emissions and the spatio-temporal interactions. On this basis, the mediation model is introduced to clarify the three impact mechanisms of green bonds and find the predominant role of technology mechanism. In addition, different characteristics in spatial interactive rules and impact mechanisms of green bonds are found in various regions of China. Finally, the study proposes some policy recommendations on how to effectively reduce carbon emissions with green bonds.