Many nations use government bonds to finance climate change mitigation projects. Since 2018, Chinese local governments have identified 'local green projects' and raised funds using local bonds. We find that primary dealers win with different rates for six green bond types compared to regular bonds. As the Central Government backs these bonds, revenue rankings could be interpreted as a direct indicator of willingness to pay for green goods. This research also suggests that dealers may be motivated to acquire green bonds as it positively influences their Environmental, Social, and Governance (ESG) scores, contributing to their long-term viability. While the counterfactually calculated cost of green bonds to the government is minimal, the study finds a correlation between the revenues from green bonds and improvements in local environmental outcomes, indicating a positive impact on both the market and environmental sustainability.
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