Climate change mitigation with Eurobonds: an Environmental Kuznets Curve analysis

Abstract

This study examines the impact of Eurobonds on carbon dioxide emissions in Africa using a panel dataset. The paper reconsidered the Environmental Kuznets Curve (EKC) and integrated it into Eurobond Environmental Kuznets Curve (EEKC). This study modelled a panel dataset spanning from 2007 to 2018 using all 17 sovereign African countries that have issued Eurobonds. The findings highlight a significant scientific value in exploring Eurobonds as a financing option to reduce carbon dioxide emissions in Africa. Specifically, the study reveals a positive relationship between Eurobond issuance and carbon dioxide emissions at the initial stage of the EEKC. By including the square term of Eurobond, the research identifies the existence of the EEKC in Africa, which supports the EKC theory. These results contribute to the growing body of literature on climate change mitigation and financing strategies in the context of African economies. Moreover, this study fills a critical void in the literature by introducing Eurobonds into the climate financing debate, emphasizing their potential role in financing climate-resilient activities. The study recommends that the issuing of Eurobonds should be linked to climate resilient activities, enabling funds to be directly invested in green sectors of the economy. This novel perspective on Eurobonds as a tool for environmentally sustainable projects adds scientific significance to the discourse on climate finance and sustainable development in Africa.