Recovery Bonds

The document outlines two primary structures for Recovery Bonds: sovereign green bonds, which earmark proceeds for eligible environmental projects, and Fossil Fuel Subsidy Reform (FFSR) bonds, which use future savings from the removal of fossil fuel subsidies as a notional basis for repayment. It provides a step-by-step issuance guide for green bonds and identifies high-potential target markets for FFSR bonds, including China, India, Indonesia, Mexico, and Vietnam, with a cumulative potential of USD 500 billion. The report argues that green stimulus offers higher economic multipliers and job creation compared to traditional recovery spending.

• Sovereign green bonds have seen strong investor demand, with 20 issuances totaling USD 89.7 billion since 2016 and an average over-subscription rate of four times.
• The European Commission is positioned to become the largest issuer of green bonds through the Next Generation EU Recovery plan, which includes EUR 750 billion in stimulus and a EUR 1.1 trillion budget, with approximately EUR 250 billion dedicated to green investments.
• Fossil fuel subsidy reform (FFSR) bonds are a novel instrument where future savings from reducing consumption subsidies—which the IEA estimates at USD 320 billion globally per year—serve as the notional basis for repayment.
• Five countries—China, India, Indonesia, Mexico, and Vietnam—are identified as primary target markets for FFSR bonds, with a combined potential issuance size of USD 506 billion based on their annual fossil fuel subsidies.
• A proposed mechanism for India involves a 'Just Transition Recovery Bond' issued by a Special Purpose Vehicle to accelerate the retirement of coal power plants aged 15-25 years, potentially reducing GHG emissions by 35 million tonnes per annum.
• Green stimulus investments provide superior economic returns compared to fossil fuels, generating approximately 7.5 full-time jobs per million dollars of investment versus 2.6 jobs for fossil fuels.

APA

Farooquee, A. A., Widge, V., Pinko, N., Purkayastha, D., & Gavarraju, V. N. (2021). Recovery Bonds. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Recovery-Bonds-Blueprint-May-2021.pdf

Chicago

Farooquee, Arsalan Ali, Vikram Widge, Nicole Pinko, Dhruba Purkayastha, and Vijay Nirmal Gavarraju. Recovery Bonds. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Recovery-Bonds-Blueprint-May-2021.pdf.

Wikipedia

{{cite report |last1=Farooquee |first1=Arsalan Ali |last2=Widge |first2=Vikram |last3=Pinko |first3=Nicole |last4=Purkayastha |first4=Dhruba |last5=Gavarraju |first5=Vijay Nirmal |title=Recovery Bonds |publisher=Climate Policy Initiative |date=May 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Recovery-Bonds-Blueprint-May-2021.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{farooquee2021recovery, author = {Farooquee, Arsalan Ali and Widge, Vikram and Pinko, Nicole and Purkayastha, Dhruba and Gavarraju, Vijay Nirmal}, title = {{Recovery Bonds}}, institution = {Climate Policy Initiative}, year = {2021}, month = may, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Recovery-Bonds-Blueprint-May-2021.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }