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Green Bond market vs. Carbon market in Europe : Two different trajectories but some complementarities

Author

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  • Yves Rannou

    (ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand, CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020])

  • Pascal Barneto

    (Universite Montesquieu - Bordeaux IV Droit, sciences sociales et politiques, sciences economiques et de gestion, IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux)

  • Mohamed Amine Boutabba

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay)

Abstract

Europe has been the first continent to create a large-scale carbon market to reduce the level of carbon emissions and to create a green bond market to finance the transition to low-carbon economies concomitantly. In this chapter, we study the respective roles of these instruments, their price trajectories, their interaction and their potential complementarities over a six-year period (2014-2019). We enrich the literature on environmental markets in several respects. First, significant short-run and long-run persistence of shocks to the conditional correlation between the European carbon and the European Green bond markets are reported. Second, we detect bi-directional shock transmission effects between those markets but no significant spillover effects. Taken together, these results suggest that a green bond issued in Europe may be used to hedge against the carbon price risk.

Suggested Citation

  • Yves Rannou & Pascal Barneto & Mohamed Amine Boutabba, 2020. "Green Bond market vs. Carbon market in Europe : Two different trajectories but some complementarities," Working Papers hal-02981422, HAL.
    • Handle: RePEc:hal:wpaper:hal-02981422
    Note: View the original document on HAL open archive server: https://uca.hal.science/hal-02981422
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    References listed on IDEAS

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    1. Ren, Xiaohang & Li, Yiying & yan, Cheng & Wen, Fenghua & Lu, Zudi, 2022. "The interrelationship between the carbon market and the green bonds market: Evidence from wavelet quantile-on-quantile method," Technological Forecasting and Social Change, Elsevier, vol. 179(C).

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    Keywords

    Green Bond; European Allowances (EUA); Spillover effects; Asset Complementarity;
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