Green bonds and the inflation reduction act (IRA)

Abstract

I study the impact of the Inflation Reduction Act (2022) on the cost of green bonds in the USA. In this study, I employ a difference-in-difference methodology to compare the cost of green bonds issued by US firms in USD after the implementation of IRA by taking green bonds issued by Non-US firms as a counterfactual. I find that after the implementation of IRA, the cost of green bonds in the USA decreased compared to that in other countries. Findings indicate that Governments can mitigate constraints on the cost and supply of climate financing through fiscal policy interventions that improve business environments for firms and spur the demand for cleaner fuels and products from individuals.