Publication:
Reducing Carbon using Regulatory and Financial Market Tools

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dc.contributor.authorAllen, Franklin
dc.contributor.authorBarbalau, Adelina
dc.contributor.authorZeni, Federica
dc.date.accessioned2023-08-08T18:49:08Z
dc.date.available2023-08-08T18:49:08Z
dc.date.issued2023-08-08
dc.description.abstractThis paper studies the conditions under which debt securities that make the cost of debt contingent on the issuer's carbon emissions, similar to sustainability-linked loans and bonds, can be equivalent to a carbon tax. The paper proposes a model in which standard and environmentally-oriented agents can adopt polluting and nonpolluting technologies, with the latter being less profitable than the former. A carbon tax can correct the laissez-faire economy in which the polluting technology is adopted by standard agents, but requires sufficient political support. Carbon-contingent securities provide an alternative price incentive for standard agents to adopt the nonpolluting technology, but require sufficient funds to fully substitute the regulatory tool. Absent political support for the tax, carbon-contingent securities can only improve welfare, but the same is not true when some support for a carbon tax exists. Understanding the conditions under which the regulatory and capital market tools are substitutes or complements within one economy is an important steppingstone in thinking about carbon pricing globally. It sheds light, for instance, on how developed economies can deploy finance to curb carbon emissions in developing economies where support for a carbon tax does not exist.en
dc.identifierhttp://documents.worldbank.org/curated/en/099333108072319011/IDU17d6c0fe715c1e1474d1ba871cf444578de7d
dc.identifier.doi10.1596/1813-9450-10539
dc.identifier.urihttps://openknowledge.worldbank.org/handle/10986/40161
dc.languageEnglish
dc.language.isoen
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Papers; 10539
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectCARBON EMISSIONS
dc.subjectCARBON TAX
dc.subjectSUSTAINABILITY-LINKED DEBT
dc.subjectVOTER WELFARE
dc.subjectCLIMATE SHOCKS AND CO2
dc.subjectGLOBAL CARBON EMISSIONS
dc.subjectCARBON PRICING
dc.titleReducing Carbon using Regulatory and Financial Market Toolsen
dc.typeWorking Paper
dspace.entity.typePublication
okr.crossref.titleReducing Carbon using Regulatory and Financial Market Tools
okr.date.disclosure2023-08-07
okr.date.doiregistration2025-04-23T02:23:05.441924Z
okr.date.lastmodified2023-08-07T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099333108072319011/IDU17d6c0fe715c1e1474d1ba871cf444578de7d
okr.guid099333108072319011
okr.identifier.docmidIDU-7d6c0fe7-5c1e-474d-ba87-cf444578de7d
okr.identifier.doi10.1596/1813-9450-10539
okr.identifier.doihttp://dx.doi.org/10.1596/1813-9450-10539
okr.identifier.externaldocumentum34131209
okr.identifier.internaldocumentum34131209
okr.identifier.reportWPS10539
okr.import.id1412
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099333108072319011/pdf/IDU17d6c0fe715c1e1474d1ba871cf444578de7d.pdfen
okr.topicEnvironment::Carbon Policy and Trading
okr.topicEnvironment::Climate Change Mitigation and Green House Gases
okr.topicEnvironment::Environmental Governance
okr.topicFinance and Financial Sector Development::Capital Markets and Capital Flows
okr.unitDECRG: Finance & Priv Sec Devt (DECFP)
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