"This book is a must read to understand the pitfalls of relying solely on financial innovation to solve the climate crisis." (Matthew Paterson, University of Manchester) "...an emphatic call for rethinking finance to advance a just energy transition" Mzukisi Qobo, Wits University) "A truly enlightening and empirically rich account of a green bond market that wasn't...." (Daniel Mertens, University Osnabrück) "...required reading for scholars of just transitions in the Global South." (Daniela Gabor, UWE Bristol) Funding low-carbon transitions to address climate change is one of the major challenges of our time. Green bonds have emerged as a powerful tool to enlist institutional investors' wealth for these transitions. But despite exponential growth in many parts of the world, the green bond market in South Africa has been stalling. This book grapples with this puzzle: It debunks some of the promises underpinning green bond markets globally and traces the manifold practices undergirding its promotion. It then identifies some barriers prohibiting the expansion of green bonds in emerging markets and zooms in on the depoliticizing tendencies a transition premised on financial innovation produces. In the last part, this work discloses the idiosyncratic political economic challenges of a fossil-based economy in transition and shines a light on the competing elements of a 'green' and a 'just' transition. In so doing, this book contributes important new qualitative insights into green bond markets-in-the-making and extends political economic scholarship on finance-led transition endeavors in emerging economies. Chapters 3 and 6 is available open access under a Creative Commons Attribution 4.0 International License via link.springer.com. Manuel Neumann is a Senior Policy Officer at the German Federal Ministry for Economic Cooperation and Development. He did his PhD at Kassel University and was a visiting scholar at Wits University in Johannesburg in 2018 and 2019. Beforehand, he worked in the development context in Geneva and Kathmandu and studied in London (M.Sc.), New Delhi, and Tübingen (B.Sc.). His research revolves around green financial innovation and the political economy of energy transitions in the global South.

Funding low-carbon transitions to address climate change is one of the major challenges of our time. Green bonds have emerged as a powerful tool to enlist institutional investors’ wealth for these transitions. But despite exponential growth in many parts of the world, the green bond market in South Africa has been stalling. This book project grapples with this puzzle. Firstly, it debunks some of the promises underpinning green bond markets and traces the manifold practices undergirding its promotion. Secondly, it identifies some barriers prohibiting the expansion of green bonds in emerging markets and zooms in on the depoliticizing tendencies a transition premised on financial innovation produces. Thirdly, this work discloses the idiosyncratic political economic challenges of a fossil-based economy in transition and shines a light on the competing elements of a ‘green’ and a ‘just’ transition. It argues that the limited uptake of green bonds can best be explained by the instrument’s inability to adequately incorporate the various demands levied on South Africa’s contested transition trajectory. In so doing, this book contributes important new qualitative insights into green bond markets-in-the-making and extends political economic scholarship on finance-led transition endeavors in emerging markets. Chapters 3 and 6 is available open access under a Creative Commons Attribution 4.0 International License via link.springer.com.

This book explores the establishment of emissions trading as a form of environmental, market-based governance. It conceptualizes markets as institutions, and analyzes them as a system of climate governance. To this end, it argues that international efforts to promulgate markets run up against local cultures of markets that shape economic practices and knowledge to different degrees. The book also examines the material implications of emissions markets on the environment and climatic systems. In sum, the study finds that cultures of markets present a substantial challenge to a universalist prescription for resolving climate change and highlights issues at the interface of political and economic governance in different political economies. This includes issues of citizen, state, and industry participation, and the materiality of economic and financial productivity.

Despite exhibiting remarkable growth, the green bond market still represents less than 1 percent of the global bond market. This paper identifies two challenges that might slow the adoption of green bonds and presents a menu of responses that policymakers, regulators, and public financial institutions can use to offset these challenges. Specifically, it explores two key dimensions: (i) the risk profile of the green bond instrument and (ii) the transaction costs associated with issuance of and reporting on green bonds. New approaches to risk design and technology-based approaches are essential to untap the potential of green bond markets, particularly in Latin America and the Caribbean and other developing regions. The incorporation of financial mechanisms such as covered bonds and guarantees can adequately address the risk of the issues, making the market more attractive for investors. Enhanced regulation and education and leveraging efficiencies of new technologies such as distributed ledger technologies can substantially reduce monitoring and reporting costs, while improving transparency in the use of proceeds and market integrity.

The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.