Green bonds are growing in popularity, but how do we know they're truly making a difference? Toitū's Science and Advisory team peer reviewed the avoided emissions claims made in the NZ Government and Auckland Council's impact reports, ensuring transparency and accountability for green bond investors.
A green bond is a loan that helps protect the environment. When a government or council needs money for a project that promises to reduce harmful emissions and help stabilise our climate - like building solar farms, electric buses, or energy-efficient buildings - they sell green bonds to investors. The investors get their money back later, plus a little extra, and New Zealand gets a better future.
Avoided emissions are used as the success measure of these projects because they show how much harmful pollution was avoided, proving the money raised by the green bonds is going towards environmentally responsible projects.
Click here to view the NZ Government and Auckland Council's green bond impact reports.
What are avoided emissions?
Avoided emissions are the reduction in greenhouse gases that would have occurred if a specific intervention or project had not been implemented. For example, if a council builds a solar farm that displaces electricity from a coal-fired power plant, the avoided emissions are the amount the coal plant would have released if the solar energy had not been available.
Avoided emissions are calculated by comparing the project’s impact to a hypothetical business-as-usual scenario, which represents the emissions that would have happened within the broader economy without the project.
Avoided emissions should not be confused with absolute emissions reductions, which refer to actual decreases in an entity’s – such as a businesses or products - emissions overtime.