Financing the Green Transition: How Green Bonds Lower CO 2 Emissions in European Countries

ABSTRACT Green bonds are one of the most critical financing methods for the green transition, which is becoming increasingly apparent as a consequence of the growing environmental issues. Green bonds are issued to allocate resources to projects with positive environmental and climate impacts and are used to finance environmentally sustainable projects. This study aims to examine the impact of green bonds on CO 2 emissions in 17 European nations that issue green bonds, using data from 2014 to 2023. The empirical model also includes income, renewable energy consumption, urbanization, environmental patents, and schooling. Upon establishing that most of the variables do not follow a normal distribution, the panel quantile regression methodology is utilized in the investigation. The findings indicate that green bonds can reduce CO 2 emissions. The paper discusses the consequences of this discovery for policymakers, green bond issuers, and investors.