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A greener economy through green finance

Client

Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology (BMK)

Year

2024


‘Green finance’ can reduce greenhouse gas emissions by up to four per cent – without shrinking the economy and significantly losing jobs. This is the result of a new study we conducted on behalf of the Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology (BMK).

The study focused on the question of the extent to which green finance instruments can serve climate protection and what economic effects can be expected for Austria. The study was limited to corporate bonds.

Climate protection needs capital

The study was carried out against the backdrop of the Green Finance Agenda, which was developed by the BMK together with the Federal Ministry of Finance (BMF). The agenda aims to promote private-sector financing of climate action and a sustainable economy. It also aims to help manage climate-related risks and create transparency and a long-term perspective on the capital market.

The study shows that for Austria,

  • If investors only demand the bonds of ecologically sustainable (green) companies, national greenhouse gas emissions can be reduced by up to four per cent.
  • The resulting increased growth of green companies offsets the economic losses of conventionally managed (grey) companies.
  • The resulting losses in gross domestic product and employment figures thus remain low.

What this means

Assuming that only bonds issued by green companies are in demand, the calculated effects represent an upper limit: they show the maximum emission reduction that green finance can achieve in the bond market. However, this alone is not enough to achieve Austria's reduction targets. However, since the economic costs are low, green finance can usefully complement funding instruments and regulatory rules.

Our approach

For the study, we carried out a model-based scenario comparison using our self-developed agent-based simulation model LABS.

The following were compared:

  • a reference scenario that roughly corresponds to the key figures of the Austrian economy in 2022,
  • a green finance scenario without transformation of grey companies, and
  • a green finance scenario in which the grey companies gradually transform into green ones.

Links and downloads

Study (PDF, BMK website)

Project team: Dr Michael Böhmer, Dr Almut Kirchner, Dr Johannes Kriebel, Jan Limbers, Hauke Toborg

Latest update: 22.11.2024

Do you have questions?

Your contact at Prognos

Dr Michael Böhmer

Managing Partner | Chief Economist

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Jan Limbers

Senior Expert

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Prognos is one of the oldest economic research centres in Europe. Founded at the University of Basel, Prognos experts have been conducting research for a wide range of clients from the public and private sectors since 1959 – politically independent, scientifically sound.

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