Effects of green bonds on Taiwan's bioenergy development

Abstract

Green financing has been proposed to stimulate and promote environment-friendly products such as low-carbon building and renewable energy to mitigate climate change since 2013; however, Taiwan's energy security is fragile and vulnerable to fluctuations of fossil prices. This study investigates how the promotion of green bonds benefits Taiwan's bioenergy production and emission reduction, as well as the development efficiency under various green-bond rates and volumes. We propose a price-endogenous, mathematical programming framework that incorporates the entire agricultural sector to simulate net bioenergy production, emission reduction, and overall profitability in the face of alternative bioenergy technologies and market conditions. The results show that if biopower and biofuel are eligible for low-cost bond financing, bioenergy production would be more stable. An increase in the emission trade price is favored to biopower technology, but this advantage will be partly recovered by a low borrowing rate because biofuel production will also be at a low production cost. In the face of energy price changes, we estimate that with an increase in green volume of US$0.61 to US$1.02 billion, a meaningful transition to bioenergy technology could occur.