Climate finance, carbon markets and carbon pricing

Prelims and Mains

A government that borrows for a solar park rather than for anything else is selling a sovereign green bond, and the only way to tell whether investors value the promise is to watch what they will pay for it.

• Price and yield move inversely, so heavy demand for a bond lowers the yield the issuer has to pay on it.
• The greenium is that discount measured against a comparable conventional bond of the same issuer and tenure.
• India has issued these bonds since 2022-23, and about ₹877 billion, or $9.2 billion, is outstanding.
• The 30-year bond of August 2026 drew a greenium of four basis points, the highest average since issuance began.
• The discount has held steady across issues rather than fading, which is the unusual part.
• Insurers drive the demand in India, because green bonds count towards their infrastructure investments.
• The government reads a standing discount as a demand signal rather than as a saving, because a few basis points on one issue is small money.