Innovative Sovereign Bond Structures for Financing a Sustainable Recovery

This research paper by the Climate Policy Initiative proposes 'Recovery Bonds' as a mechanism for sovereign nations to raise capital for climate-resilient, post-COVID-19 economic recovery, specifically focusing on sovereign green bonds and bonds linked to fossil fuel subsidy reform (FFSR).

• Recovery Bonds are designed to align economic, social, and climate priorities by linking sovereign borrowing to the targeted deployment of capital for low-carbon sustainable recovery, specifically aiming to decrease emissions, increase renewable energy distribution, and create green jobs.
• Sovereign green recovery bonds function similarly to traditional green bonds by earmarking proceeds for eligible projects with environmental benefits. Between 2016 and the date of publication, 20 sovereign green bonds totaling USD 89.7 billion were issued, funding projects such as waste management, landscape conservation, waterways maintenance, and solar power plants.
• Fossil Fuel Subsidy Reform (FFSR) bonds propose using future savings from the reduction or elimination of fossil fuel subsidies—which the IEA estimates cost the world USD 320 billion annually—as the basis for repaying bonds issued today. While no country has yet issued an FFSR bond, they could reduce fossil fuel use and emissions and decrease exposure to stranded assets.
• The implementation of FFSR bonds faces specific hurdles, including the difficulty of estimating correct subsidies and energy prices, managing the impact of price changes on consumers, and securing social and political support.

APA

Climate Policy Initiative (2021). Innovative Sovereign Bond Structures for Financing a Sustainable Recovery. https://www.climatepolicyinitiative.org/publication/recovery-bonds/

Chicago

Climate Policy Initiative. Innovative Sovereign Bond Structures for Financing a Sustainable Recovery. 2021. https://www.climatepolicyinitiative.org/publication/recovery-bonds/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Innovative Sovereign Bond Structures for Financing a Sustainable Recovery |date=10 May 2021 |url=https://www.climatepolicyinitiative.org/publication/recovery-bonds/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2021innovative, author = {{Climate Policy Initiative}}, title = {{Innovative Sovereign Bond Structures for Financing a Sustainable Recovery}}, institution = {Climate Policy Initiative}, year = {2021}, month = may, url = {https://www.climatepolicyinitiative.org/publication/recovery-bonds/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }