Green Bonds and Carbon Markets in Developing Economies: A Case Study of Mozambique

This article explores how green bonds, carbon markets, and related instruments can unlock climate finance in developing countries, with a focus on Mozambique. Drawing on the Roadmap for Green Finance in Mozambique (FSDMoçambique & EED Advisory, 2021) and international evidence, it highlights the rapid growth of global sustainable debt markets -over USD 3 trillion in lifetime issuance - and the emerging role of carbon pricing and debt-for-climate swaps. Despite Mozambique’s modest participation to date, recent regulatory developments - including a draft decree on green, blue, and social bonds - and negotiations for debt swaps (e.g., with Belgium) signal growing commitment. However, structural barriers persist, including weak regulatory capacity, limited bankable projects, and macroeconomic volatility. Opportunities lie in the country’s renewable energy potential, donor-backed technical assistance, and integration into regional initiatives such as the SADC Green Bond Program and the Africa Carbon Markets Initiative. The paper synthesizes best practices from Africa and beyond - such as Kenya’s sovereign green bond, Seychelles’ debt-for-nature swap, and blended finance models - and proposes integrated policy actions to scale green finance in Mozambique. Key recommendations include finalizing sustainable bond regulation, developing a national green taxonomy, and investing in institutional capacity and transparency frameworks.