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The federal government could help drive the growth of Canada’s green bond market by launching its own green offerings, says a new report from the C.D. Howe Institute.

Canada’s green bond market has grown rapidly over the past five years, led by green bond issues from provinces and cities, the Toronto-based think tank said, and the federal government has indicated it will start directly issuing its own green bonds.

Following through on that pledge could finance green infrastructure projects to improve climate resilience and reduce greenhouse gas (GHG) emissions, set performance standards and establish a benchmark for other Canadian green bond issuers, the report suggested.

“Federal green bond issues could help to restore and then fuel growth in the Canadian green bond market for institutional and other investors, building institutional capacity while setting the best possible price benchmark for Canadian-dollar issues,” it said.

The critical next steps for federal offerings include defining the financing structure, standards and conditions, it noted.

Additionally, the report suggested that the federal government could consider policy action to “help develop more common global green bond standards.”

“Ultimately, the federal government should expect to engage all available economic and policy instruments if it is committed to reducing GHG emissions and reach net-zero emissions by 2050 within a well-performing economy,” the report said.