Hedging Carbon Price Risk on EU ETS: A Comparison of Green Bonds from the EU, US, and China

Nhung Thi Nguyen (), Mai Thi Ngoc Nguyen, Trang Thi Huyen Do, Truong Quang Le and Nhi Hoang Uyen Nguyen
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Nhung Thi Nguyen: Faculty of Finance and Banking, VNU University of Economics and Business, Hanoi 100000, Vietnam
Mai Thi Ngoc Nguyen: Faculty of Finance and Banking, VNU University of Economics and Business, Hanoi 100000, Vietnam
Trang Thi Huyen Do: Faculty of Finance and Banking, VNU University of Economics and Business, Hanoi 100000, Vietnam
Truong Quang Le: Faculty of Finance and Banking, VNU University of Economics and Business, Hanoi 100000, Vietnam
Nhi Hoang Uyen Nguyen: Faculty of Finance and Banking, VNU University of Economics and Business, Hanoi 100000, Vietnam

Sustainability, 2024, vol. 16, issue 14, 1-19

Abstract: This article aims to examine the hedging effect of green bonds in the US market, the European market, and the Chinese market on carbon price risk in the European Union Emission Trading System (EU ETS) from 2021 to 2023. By using daily datasets extracted from Bloomberg and the Vector Error Correction Model (VECM), the research provides evidence of the hedging effect of green bonds in all three markets on carbon price risk in the EU ETS. The paper concludes that the hedging ratio is positive for green bonds in the EU and China, while the figure for the US market is negative. Moreover, there is a positive effect of oil prices on carbon returns in EU ETS. Meanwhile, the opposite is found for stock prices.

Keywords: hedging; green bond; carbon market risk (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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