Jeffrey Simpson supports government-backed "green bonds" as a way to raise new risk capital for environmental investments (Selling Canadians On Green Bonds To Wean Us From Carbon - Jan. 4). Green bonds are a clever idea, but an environmental investment tax credit would be wiser. Both would use the government's fiscal capacity to support targeted investment in greener technologies. Similar selection criteria would be needed, and they would have the common challenge of determining whether the green investment supported was incremental.
A key weakness of green bonds is the potential cost of a government guarantee, which could not be determined in advance, since the return on investment in new green technologies would be unknown.
In contrast, the government could place limits on the environmental investment tax credits available to individual firms.