Menu Expand

Central Bank Policies and Climate Change. Where Do We Stand?

  1. Journals
  2. Economics, Finance, Business & Management
  3. Credit and Capital Markets – Kredit und Kapital
  4. Vol. 55, Issue 3
  5. pp. 381–411

JOURNAL ARTICLE

Cite JOURNAL ARTICLE

Style
Vollmer, U. Central Bank Policies and Climate Change. Where Do We Stand?. Credit and Capital Markets – Kredit und Kapital, 55(3), 381-411. https://doi.org/10.3790/ccm.55.3.381
Vollmer, Uwe "Central Bank Policies and Climate Change. Where Do We Stand?" Credit and Capital Markets – Kredit und Kapital 55.3, 2022, 381-411. https://doi.org/10.3790/ccm.55.3.381
Vollmer, Uwe (2022): Central Bank Policies and Climate Change. Where Do We Stand?, in: Credit and Capital Markets – Kredit und Kapital, vol. 55, iss. 3, 381-411, [online] https://doi.org/10.3790/ccm.55.3.381
Format
Download

Central Bank Policies and Climate Change. Where Do We Stand?

Vollmer, Uwe

Credit and Capital Markets – Kredit und Kapital, Vol. 55 (2022), Iss. 3 : pp. 381–411

Read Now Download (PDF)

Additional Information

Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.55.3.381
Language
English
Pages
31
Keywords

Author Details

Prof. Dr. Uwe Vollmer, Leipzig University, Economics Department, Institute for Theoretical Economics, Grimmaische Str. 12, D-04109 Leipzig, Germany.

References

  1. Abiry, R./Ferdinandusse, M./Ludwig, A./Nerlich, C. (2022): Climate change mitigation: How effective is green quantitative easing?, ECB Working Paper No. 2022/2701, Frankfurt/M.  Google Scholar
  2. Alessi, L./Battiston, S. (2022): Two sides of the same coin: Green taxonomy alignment versus transition risk in financial portfolios, in: International Review of Financial Analysis, 102319.  Google Scholar
  3. Annicchiarico, B./Carattini, S./Fischer, C./Heutel, G. (2021), Business cycles and environment policy: Literature review and policy implications, Working Paper 29032, Cambridge/Mass.  Google Scholar
  4. Annicchiarico, B./Di Dio, F. (2015): Environmental policy and macroeconomic dynamics in a new Keynesian model, in: Journal of Environmental Economics and Management, Vol. 69, pp. 1–21.  Google Scholar
  5. Annicchiarico, B./Di Dio, F. (2017): GHG emissions control and monetary policy, in: Environmental and Resource Economics, Vol. 67(4), pp. 823–851.  Google Scholar
  6. Baranovic, I./Busies, I./Coussens, W./Grill, M./Hempell, H. (2022): The challenge of capturing climate risks in the banking regulatory framework: Is there a need for a macroprudential response?, in: ECB Macroprudential Bulletin, 2021, Vol. 15.  Google Scholar
  7. Batsaikhan, U./Jourdan, S. (2021): Money looking for a home. Technical report, Positive Money Europe.  Google Scholar
  8. Belloni, M./Kuik, F./Mingarelli, L. (2022): Euro area banks’ sensitivity to changes in carbon price, European Central Bank, WP 2654, Frankfurt/M.  Google Scholar
  9. Böser, F./Colesanti Senni, C. (2021): CAROs: Climate risk-adjusted refinancing operations, mimeo, ETH Zürich.  Google Scholar
  10. Boneva, I./Tamburri, F. (2020): Box 1: The role of the euro in global green bond markets, in: European Central Bank, The International Role of the Euro, Frankfurt/M., p. 20–22.  Google Scholar
  11. Bovari, E./Giraud, G./McIssak, F. (2018): Coping with collapse: A stock-flow consistent monetary macrodynamics of global warming, in: Ecological Economics, Vol. 147, pp. 383–398.  Google Scholar
  12. Breitenfellner, W./Pointner, W. (2021): The impact of climate change on monetary policy, OeNB, Monetary Policy & the Economy Q3/21, pp. 59–80.  Google Scholar
  13. Brunnermeier, M./Landau, J.-P. (2020): Central Banks and Climate Change, https://voxeu.org/article/central-banks-and-climate-change.  Google Scholar
  14. Campiglio, E. (2016): Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy, in: Energy Economics, Vol. 121, pp. 220–230.  Google Scholar
  15. Campiglio, E./Dafermos, Y./Monnin, P./Ryan-Collins, J./Schotten, G./Tanaka, M. (2018): Climate change challenges for central banks and financial regulators, in: Nature Climate Change, Vol. 8, pp. 462–468.  Google Scholar
  16. Cantelmo, A. (2022): Rare disasters, the natural interest rate and monetary policy, in: Oxford Bulletin of Economics and Statistics, 473–496.  Google Scholar
  17. Carattini, S./Heutel, G./Melkadze, G. (2021): Climate policy, financial frictions, and transition risk, NBER Working Paper No. 28525.  Google Scholar
  18. Carney, M. (2015): Breaking the tragedy of the horizon – climate change and financial stability, Speech at Lloyd’s of London, 29 September.  Google Scholar
  19. Chan, Y. T. (2020): Are macroeconomic policies better in curbing air pollution than environmental policies? A DSGE approach with carbon-dependent fiscal and monetary policies, in: Energy Policy, Vol. 141, June 2020.  Google Scholar
  20. Chen, C./Pan, D./Huang, Z./Bleischwitz, R. (2021): Engaging central banks in climate change? The mix of monetary and climate policy, in: Energy Economics, Vol. 103, 105531.  Google Scholar
  21. Comerford, D./Spiganti, D. (2020): The carbon bubble: Climate policy in a fire-sale model of deleveraging, EUI MWP, 2020/04, https://hdl.handle.net/1814/67434.  Google Scholar
  22. Dafermos, Y./Gabor, D./Nikolaidi, M./Paeloff, A./Van Lerven, F. (2021), Greening the Eurosystem Collateral Framework. How to Decarbonise the ECB’s Monetary Policy, New Economic Foundation. https://neweconomics.org/2021/03/greening-the-eurosystem-collateral-framework.  Google Scholar
  23. Dafermos, Y./Nikolaidi, M. (2021): How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis, in: Journal of Financial Stability, Vol. 54, 100871.  Google Scholar
  24. Dafermos, Y./Nikolaidi, M./Galanis, G. (2017): A stock-flow-fund ecological macroeconomic model, in: Ecological Economics, Vol. 131, pp. 191–207.  Google Scholar
  25. Dafermos, Y./Nikolaidi, M./Galanis, G. (2018): Climate change, financial stability and monetary policy, in: Ecological Economics, Vol. 152, pp. 219–234.  Google Scholar
  26. De Santis, R. A./Hettler, K./Roos, M./Tamburrini, F. (2018): Purchases of green bonds under the eurosystem’s asset purchase programme, in: Economic Bulletin, 7/2018.  Google Scholar
  27. Dietrich, A./Müller, G./Schoenle, R. (2021): The expectations channel of climate change: Implications for monetary policy, CEPR Discussion Paper 15866.  Google Scholar
  28. Dietz, S./Bowen, A./Dixon, C./Grandwell, F. (2016): ‘Climate value at risk’ of global financial assets, in: Nature Climate Change, Vol. 6, pp. 676–679.  Google Scholar
  29. Dikau, S./Volz, U. (2021): Central bank mandates, sustainability objectives and the promotion of green finance, in: Ecological Economics, Vol. 84.  Google Scholar
  30. Diluiso, F./Annicchiarico, B./Kalkuhl, M./Minx, J. (2021): Climate actions and macro-financial stability: The role of central banks, in: Journal of Environmental Economics and Management, Vol. 110, October, 102548.  Google Scholar
  31. D’Orazio, P./Hertel, T./Kasbrink, F. (2022): No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks, Ruhr Economic Papers No. 946, Essen.  Google Scholar
  32. D’Orazio, P./Popoyan, L. (2022): Realising Central Banks’ Climate Ambitions Through Financial Stability Mandates, in: Intereconomics, Vol. 57 (2), pp. 103–111.  Google Scholar
  33. ECB/ESRB Project Team on Climate Risk Monitoring (2021): Climate-related risk and financial stability, Frankfurt/M., https://www.ecb.europa.eu/pub/pdf/other/ecb.climateriskfinancialstability 202107~87822fae81.en.pdf.  Google Scholar
  34. Economides, G./Smarzcynska Javorcik, B. (2019): The Effects of Climate Change on a Small Open Economy, CESifo Working Paper No. 7582, Munich.  Google Scholar
  35. Economides, G./Xepapadeas, A. (2018): Monetary policy under climate change, CESifo WP No, 7021, Munich.  Google Scholar
  36. European Energy Agency – EEA (2021): Greenhouse gas emission targets, trends, and member states MMR projections in the EU, https://www.eea.europa.eu/ims/total-greenhouse-gas-emission-trends.  Google Scholar
  37. Faccia, D./Parker, M./Stracca, L. (2021): Feeling the heat: Extreme temperatures and price stability, ECB Working Paper Series No. 2626, Frankfurt/M.  Google Scholar
  38. Fatica, S./Panzica, R./Rancan, M. (2021): The pricing of green bonds, in: Journal of Financial Stability, Vol. 54, 100873.  Google Scholar
  39. Fender, I./McMorrow, M./Sahakyan, V./Zulaica, O. (2019): Green bonds: The reserve management perspective, BIS Quarterly Review, September, Basel.  Google Scholar
  40. Fender, I./McMorrow, M./Sahakyan, V./Zulaica, O. (2020): Reserve management and sustainability: The case for green bonds? BIS Working Paper No. 849, Basel.  Google Scholar
  41. Ferrari, A./Nispi Landi, V. (2020): Whatever it takes to save the planet? Central banks and unconventional green policy, ECB Working Paper Series No 2500, Frankfurt/M. December.  Google Scholar
  42. Ferrari, A./Nispi Landi, V. (2022): Toward a green economy: The role of central bank’s asset purchases, Banca D’Italia WP.  Google Scholar
  43. Ferrari, M./Sole Pagli, M. (2021): No country is an island: International cooperation and climate change, ECB WP 2568, Frankfurt/M.  Google Scholar
  44. Fischer, C./Springborn, M. (2011): Emissions targets and the real business cycle: Intensity targets versus caps or taxes, in: Journal of Environmental Economics and Management, Vol. 62(3), pp. 352–366.  Google Scholar
  45. Galì, J. (2008): Monetary policy, inflation, and the business cycle: An introduction to the new Keynesian framework, 2. ed., Princeton.  Google Scholar
  46. Gertler, M./Karadi, P. (2011): A model of unconventional monetary policy, in: Journal of Monetary Economics 58(1), pp. 17–34.  Google Scholar
  47. Gertler, M./Kiyotaki, N. (2011): Financial intermediation and credit policy in business cycle analysis, in: Friedman, B. and Woodford, M., eds., Handbook of Monetary Economics, ed., Vol. 3A, pp. 547–599.  Google Scholar
  48. Giovanardi, F./Kaldorf, M./Radke, I./Wicknig, F. (2022): The preferential treatment of green bonds, mimeo, University of Cologne.  Google Scholar
  49. Giuzio, M./Krusec, D./Levels, A./Sofia Melo, A. S./Mikkonen, K./Radulova, P. (2019): Climate change and financial stability, in: Financial Stability Review, Vol. 1, May.  Google Scholar
  50. Golosov, M./Hassler, J./Krusell, P./Tsyvinski, A. (2014): Optimal taxes on fossil in general equilibrium, in: Econometrica, Vol. 82(1), pp. 41–88.  Google Scholar
  51. Gourio, F. (2012): Disaster Risk and Business Cycles, in: American Economic Review, Vol. 102 (6), pp. 2734–2766.  Google Scholar
  52. Gross, J./Zahner, J. (2021): What is on the ECB’s mind? Monetary policy before and after the global financial crisis, in: Journal of Macroeconomics, Vol. 68, June, 103292.  Google Scholar
  53. Hardt, L./O’Neill, D. W. (2017): Ecological macroeconomics models: Assessing current developments, in: Ecological Economic, Vol. 134, pp. 198–211.  Google Scholar
  54. Hassler, J./Krusell, P./Smith Jr., A.A. (2016): Environmental macroeconomics. Handbook of Macroeconomics, Vol. 2, pp. 1893–2008.  Google Scholar
  55. Heutel, G. (2012): How should environmental policy respond to business cycles? Optimal policy under persistent productivity shocks, in: Review of Economic Dynamics, Vol. 15(2), pp. 244–264.  Google Scholar
  56. Höhne, N./den Elzen, M./Joeri Rogelj, J./Metz, B./Fransen, T./Kuramochi, T./Olhoff, A./Alcamo, J./Winkler, H./Fu, S./Schaeffer, M./Schaeffer, R./Peters, G. P./Maxwell, S./Dubash, N. K. (2020): Emissions: world has four times the work or one-third of the time, in: Nature, Vol. 579, pp. 25–28.  Google Scholar
  57. Keen, B./Pakko, M. R. (2011): Monetary policy and natural desasters in DSDE models, in: Southern Economic Journal, Vol. 77(4), pp. 973–990.  Google Scholar
  58. Konradt, M./Weder di Mauro, B. (2021): Carbon taxation and inflation: Evidence from Canada and Europe, CEPR Discussion Paper Series, No 16396.  Google Scholar
  59. Kovats, R. S./Valentini, R./Bouwer, L. M./Georgopoulou, E./Jacob, D./Martin, E./Rounsevell, M./Soussana, J.-F. (2014): Europe, in: Barros, V. R./Field, C. B./Dokken, D. J./Mastrandrea, M. D./Mach, K. J./Bilir, T. E./Chatterjee, M./Ebi, K. L./Estrada, Y. O./Genova, R. C./Girma, B./Kissel, E. S./Levy, A. N./MacCracken, S./Mastrandrea, P. R./White, L. L. (eds.), Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge/New York, pp. 1267–1326.  Google Scholar
  60. Lagarde, C. (2021): Climate change and central banking. Keynote speech at the ILF conference on Green Banking and Green Central Banking, Frankfurt/M.  Google Scholar
  61. Lamperti, F./Bosetti, V./Roventini, A./Tavoni, M. (2019): The public costs of climate-induced financial instability, in: Nature Climate Change, Vol. 9, pp. 829–835.  Google Scholar
  62. Lamperti, F./Dosi, G./Napoletano, M./Roventini, A./Sapio, A. (2018): Faraway, so close: Coupled climate and economic dynamics in an agent-based integrated assessment model, in: Ecological Economics, Vol. 150, pp. 315–339.  Google Scholar
  63. Macaire, C./Naef, A. (2022): Greening monetary policy: Evidence from the People’s Bank of China, in: Climate Policy, DOI: 10.1080/14693062.2021.2013153.  Google Scholar
  64. Matikainen, S./Campiglio, E./Zenghelis, D. (2017): The climate impact of quantitative easing. Grantham Research Institute on Climate Change and the Environment Policy Paper. https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2017/05/ClimateImpactQuant Easing_Matikainen-et-al.pdf.  Google Scholar
  65. Moessner, R. (2022): Effects of carbon pricing on inflation, CESifo WP 9563, Munich.  Google Scholar
  66. Monnin, P. (2018): Central banks and the transition to a low-carbon economy, Council of Economic Policies. Discussion Note.  Google Scholar
  67. Mukherjee, K./Ouattara, B. (2021): Climate and monetary policy: Do temperature shocks lead to inflationary pressures?, in: Climatic Change, Vol. 167, 32. https://doi.org/10.1007/s10584-021-03149-2.  Google Scholar
  68. Nordhaus, W./Sztorc, P. (2013): DICE 2013R: Introduction and User’s Manual, 2. ed., mimeo, Yale University.  Google Scholar
  69. Otto, F. E. L./Harrington, L./Frame, D./Boyd, E./Lauta, K./Wehner, M./Clarke, B./Raju, E./Boda, C./Hauser, M./James, R./Jones, R. (2020): Toward an inventory of the impacts of human-induced climate change, in: Bulletin of the American Meteorological Society, Vol. 101(11), pp. E1972–E1979.  Google Scholar
  70. Papoutsi, M./Piazzesi, M./Schneider, M. (2021): How unconventional is green monetary policy?, https://web.stanford.edu/~piazzesi/How_unconventional_is_green_monetary_ policy.pdf.  Google Scholar
  71. Rezai, A./Taylor, L./Mechler, R. (2013): Ecological macroeconomics: An application to climate change, in: Ecological Economics, Vol. 85, pp. 69–76.  Google Scholar
  72. Roncoroni, A./Battsiton, S./Farfan, E./Leonardo, L. O./Jaramillo, S. M. (2021): Climate risk and financial stability in the networks of banks and investment funds, in: Journal of Financial Stability, Vol. 54, 100870.  Google Scholar
  73. Schoenmaker, D. (2019): Greening monetary policy, VoxEU, 17. April 2019.  Google Scholar
  74. Semieniuk, G./Campiglio, E./Mercure, J.-F./Volz, U./Edwards, N. (2020): Low-carbon transition risks for finance, in: WIREs Climate Change, Vol. 11, pp. 1–24.  Google Scholar
  75. Stott, P. et al. (2016): Attribution of extreme weather and climate-related events, in: WIREs Climate Change, Vol. 7(1), pp. 23–41.  Google Scholar
  76. Stroebel, J./Wurgler, J. (2021): What do you think about climate finance?, in: Journal of Financial Economics, Vol. 142 (2), pp. 487–498.  Google Scholar
  77. United Nations (n.d.): What is climate change?, https://www.un.org/en/climatechange/what-is-climate-change.  Google Scholar
  78. Van Bekkum, S./Gabarro, M./Irani, R. M. (2017): Does a larger menu increase appetite? Collateral eligibility and credit supply, in: Review of Financial Studies, Vol. 31(3), pp. 943–979.  Google Scholar
  79. van’t Klooster, J./van Tilburg, R. (2020): Targeting a sustainable recovery with green TLTROs. Technical report, Positive Money Europe.  Google Scholar
  80. Vollmer, U. (2022): Monetary policy or macroprudential policies: What can tame the cycles?, in: Journal of Economic Surveys, Vol. 36(5), pp. 1510–1538.  Google Scholar
  81. Walsh, E. (2017): Monetary theory and policy, 4. ed., Cambridge, London.  Google Scholar
  82. Weitzman, M. L. (2012): GHG targets as insurance against catastrophic climate damages, in: Journal of Public Economic Theory, Vol. 14(2), pp. 221–244.  Google Scholar
  83. Work Stream on Climate Change (2021): Climate change and monetary policy in the euro area, European Central Bank, Occasional Paper Series, Frankfurt/M.  Google Scholar
  84. Zerbib, O. D. (2019): The effect of pro-environmental preferences on bond prices: Evidence from green bonds, in: Journal of Banking & Finance, Vol. 98, S. 39–60.  Google Scholar
  85. Abiry, R./Ferdinandusse, M./Ludwig, A./Nerlich, C. (2022): Climate change mitigation: How effective is green quantitative easing?, ECB Working Paper No. 2022/2701, Frankfurt/M.  Google Scholar
  86. Alessi, L./Battiston, S. (2022): Two sides of the same coin: Green taxonomy alignment versus transition risk in financial portfolios, in: International Review of Financial Analysis, 102319.  Google Scholar
  87. Annicchiarico, B./Carattini, S./Fischer, C./Heutel, G. (2021), Business cycles and environment policy: Literature review and policy implications, Working Paper 29032, Cambridge/Mass.  Google Scholar
  88. Annicchiarico, B./Di Dio, F. (2015): Environmental policy and macroeconomic dynamics in a new Keynesian model, in: Journal of Environmental Economics and Management, Vol. 69, pp. 1–21.  Google Scholar
  89. Annicchiarico, B./Di Dio, F. (2017): GHG emissions control and monetary policy, in: Environmental and Resource Economics, Vol. 67(4), pp. 823–851.  Google Scholar
  90. Baranovic, I./Busies, I./Coussens, W./Grill, M./Hempell, H. (2022): The challenge of capturing climate risks in the banking regulatory framework: Is there a need for a macroprudential response?, in: ECB Macroprudential Bulletin, 2021, Vol. 15.  Google Scholar
  91. Batsaikhan, U./Jourdan, S. (2021): Money looking for a home. Technical report, Positive Money Europe.  Google Scholar
  92. Belloni, M./Kuik, F./Mingarelli, L. (2022): Euro area banks’ sensitivity to changes in carbon price, European Central Bank, WP 2654, Frankfurt/M.  Google Scholar
  93. Böser, F./Colesanti Senni, C. (2021): CAROs: Climate risk-adjusted refinancing operations, mimeo, ETH Zürich.  Google Scholar
  94. Boneva, I./Tamburri, F. (2020): Box 1: The role of the euro in global green bond markets, in: European Central Bank, The International Role of the Euro, Frankfurt/M., p. 20–22.  Google Scholar
  95. Bovari, E./Giraud, G./McIssak, F. (2018): Coping with collapse: A stock-flow consistent monetary macrodynamics of global warming, in: Ecological Economics, Vol. 147, pp. 383–398.  Google Scholar
  96. Breitenfellner, W./Pointner, W. (2021): The impact of climate change on monetary policy, OeNB, Monetary Policy & the Economy Q3/21, pp. 59–80.  Google Scholar
  97. Brunnermeier, M./Landau, J.-P. (2020): Central Banks and Climate Change, https://voxeu.org/article/central-banks-and-climate-change.  Google Scholar
  98. Campiglio, E. (2016): Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy, in: Energy Economics, Vol. 121, pp. 220–230.  Google Scholar
  99. Campiglio, E./Dafermos, Y./Monnin, P./Ryan-Collins, J./Schotten, G./Tanaka, M. (2018): Climate change challenges for central banks and financial regulators, in: Nature Climate Change, Vol. 8, pp. 462–468.  Google Scholar
  100. Cantelmo, A. (2022): Rare disasters, the natural interest rate and monetary policy, in: Oxford Bulletin of Economics and Statistics, 473–496.  Google Scholar
  101. Carattini, S./Heutel, G./Melkadze, G. (2021): Climate policy, financial frictions, and transition risk, NBER Working Paper No. 28525.  Google Scholar
  102. Carney, M. (2015): Breaking the tragedy of the horizon – climate change and financial stability, Speech at Lloyd’s of London, 29 September.  Google Scholar
  103. Chan, Y. T. (2020): Are macroeconomic policies better in curbing air pollution than environmental policies? A DSGE approach with carbon-dependent fiscal and monetary policies, in: Energy Policy, Vol. 141, June 2020.  Google Scholar
  104. Chen, C./Pan, D./Huang, Z./Bleischwitz, R. (2021): Engaging central banks in climate change? The mix of monetary and climate policy, in: Energy Economics, Vol. 103, 105531.  Google Scholar
  105. Comerford, D./Spiganti, D. (2020): The carbon bubble: Climate policy in a fire-sale model of deleveraging, EUI MWP, 2020/04, https://hdl.handle.net/1814/67434.  Google Scholar
  106. Dafermos, Y./Gabor, D./Nikolaidi, M./Paeloff, A./Van Lerven, F. (2021), Greening the Eurosystem Collateral Framework. How to Decarbonise the ECB’s Monetary Policy, New Economic Foundation. https://neweconomics.org/2021/03/greening-the-eurosystem-collateral-framework.  Google Scholar
  107. Dafermos, Y./Nikolaidi, M. (2021): How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis, in: Journal of Financial Stability, Vol. 54, 100871.  Google Scholar
  108. Dafermos, Y./Nikolaidi, M./Galanis, G. (2017): A stock-flow-fund ecological macroeconomic model, in: Ecological Economics, Vol. 131, pp. 191–207.  Google Scholar
  109. Dafermos, Y./Nikolaidi, M./Galanis, G. (2018): Climate change, financial stability and monetary policy, in: Ecological Economics, Vol. 152, pp. 219–234.  Google Scholar
  110. De Santis, R. A./Hettler, K./Roos, M./Tamburrini, F. (2018): Purchases of green bonds under the eurosystem’s asset purchase programme, in: Economic Bulletin, 7/2018.  Google Scholar
  111. Dietrich, A./Müller, G./Schoenle, R. (2021): The expectations channel of climate change: Implications for monetary policy, CEPR Discussion Paper 15866.  Google Scholar
  112. Dietz, S./Bowen, A./Dixon, C./Grandwell, F. (2016): ‘Climate value at risk’ of global financial assets, in: Nature Climate Change, Vol. 6, pp. 676–679.  Google Scholar
  113. Dikau, S./Volz, U. (2021): Central bank mandates, sustainability objectives and the promotion of green finance, in: Ecological Economics, Vol. 84.  Google Scholar
  114. Diluiso, F./Annicchiarico, B./Kalkuhl, M./Minx, J. (2021): Climate actions and macro-financial stability: The role of central banks, in: Journal of Environmental Economics and Management, Vol. 110, October, 102548.  Google Scholar
  115. D’Orazio, P./Hertel, T./Kasbrink, F. (2022): No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks, Ruhr Economic Papers No. 946, Essen.  Google Scholar
  116. D’Orazio, P./Popoyan, L. (2022): Realising Central Banks’ Climate Ambitions Through Financial Stability Mandates, in: Intereconomics, Vol. 57 (2), pp. 103–111.  Google Scholar
  117. ECB/ESRB Project Team on Climate Risk Monitoring (2021): Climate-related risk and financial stability, Frankfurt/M., https://www.ecb.europa.eu/pub/pdf/other/ecb.climateriskfinancialstability 202107~87822fae81.en.pdf.  Google Scholar
  118. Economides, G./Smarzcynska Javorcik, B. (2019): The Effects of Climate Change on a Small Open Economy, CESifo Working Paper No. 7582, Munich.  Google Scholar
  119. Economides, G./Xepapadeas, A. (2018): Monetary policy under climate change, CESifo WP No, 7021, Munich.  Google Scholar
  120. European Energy Agency – EEA (2021): Greenhouse gas emission targets, trends, and member states MMR projections in the EU, https://www.eea.europa.eu/ims/total-greenhouse-gas-emission-trends.  Google Scholar
  121. Faccia, D./Parker, M./Stracca, L. (2021): Feeling the heat: Extreme temperatures and price stability, ECB Working Paper Series No. 2626, Frankfurt/M.  Google Scholar
  122. Fatica, S./Panzica, R./Rancan, M. (2021): The pricing of green bonds, in: Journal of Financial Stability, Vol. 54, 100873.  Google Scholar
  123. Fender, I./McMorrow, M./Sahakyan, V./Zulaica, O. (2019): Green bonds: The reserve management perspective, BIS Quarterly Review, September, Basel.  Google Scholar
  124. Fender, I./McMorrow, M./Sahakyan, V./Zulaica, O. (2020): Reserve management and sustainability: The case for green bonds? BIS Working Paper No. 849, Basel.  Google Scholar
  125. Ferrari, A./Nispi Landi, V. (2020): Whatever it takes to save the planet? Central banks and unconventional green policy, ECB Working Paper Series No 2500, Frankfurt/M. December.  Google Scholar
  126. Ferrari, A./Nispi Landi, V. (2022): Toward a green economy: The role of central bank’s asset purchases, Banca D’Italia WP.  Google Scholar
  127. Ferrari, M./Sole Pagli, M. (2021): No country is an island: International cooperation and climate change, ECB WP 2568, Frankfurt/M.  Google Scholar
  128. Fischer, C./Springborn, M. (2011): Emissions targets and the real business cycle: Intensity targets versus caps or taxes, in: Journal of Environmental Economics and Management, Vol. 62(3), pp. 352–366.  Google Scholar
  129. Galì, J. (2008): Monetary policy, inflation, and the business cycle: An introduction to the new Keynesian framework, 2. ed., Princeton.  Google Scholar
  130. Gertler, M./Karadi, P. (2011): A model of unconventional monetary policy, in: Journal of Monetary Economics 58(1), pp. 17–34.  Google Scholar
  131. Gertler, M./Kiyotaki, N. (2011): Financial intermediation and credit policy in business cycle analysis, in: Friedman, B. and Woodford, M., eds., Handbook of Monetary Economics, ed., Vol. 3A, pp. 547–599.  Google Scholar
  132. Giovanardi, F./Kaldorf, M./Radke, I./Wicknig, F. (2022): The preferential treatment of green bonds, mimeo, University of Cologne.  Google Scholar
  133. Giuzio, M./Krusec, D./Levels, A./Sofia Melo, A. S./Mikkonen, K./Radulova, P. (2019): Climate change and financial stability, in: Financial Stability Review, Vol. 1, May.  Google Scholar
  134. Golosov, M./Hassler, J./Krusell, P./Tsyvinski, A. (2014): Optimal taxes on fossil in general equilibrium, in: Econometrica, Vol. 82(1), pp. 41–88.  Google Scholar
  135. Gourio, F. (2012): Disaster Risk and Business Cycles, in: American Economic Review, Vol. 102 (6), pp. 2734–2766.  Google Scholar
  136. Gross, J./Zahner, J. (2021): What is on the ECB’s mind? Monetary policy before and after the global financial crisis, in: Journal of Macroeconomics, Vol. 68, June, 103292.  Google Scholar
  137. Hardt, L./O’Neill, D. W. (2017): Ecological macroeconomics models: Assessing current developments, in: Ecological Economic, Vol. 134, pp. 198–211.  Google Scholar
  138. Hassler, J./Krusell, P./Smith Jr., A.A. (2016): Environmental macroeconomics. Handbook of Macroeconomics, Vol. 2, pp. 1893–2008.  Google Scholar
  139. Heutel, G. (2012): How should environmental policy respond to business cycles? Optimal policy under persistent productivity shocks, in: Review of Economic Dynamics, Vol. 15(2), pp. 244–264.  Google Scholar
  140. Höhne, N./den Elzen, M./Joeri Rogelj, J./Metz, B./Fransen, T./Kuramochi, T./Olhoff, A./Alcamo, J./Winkler, H./Fu, S./Schaeffer, M./Schaeffer, R./Peters, G. P./Maxwell, S./Dubash, N. K. (2020): Emissions: world has four times the work or one-third of the time, in: Nature, Vol. 579, pp. 25–28.  Google Scholar
  141. Keen, B./Pakko, M. R. (2011): Monetary policy and natural desasters in DSDE models, in: Southern Economic Journal, Vol. 77(4), pp. 973–990.  Google Scholar
  142. Konradt, M./Weder di Mauro, B. (2021): Carbon taxation and inflation: Evidence from Canada and Europe, CEPR Discussion Paper Series, No 16396.  Google Scholar
  143. Kovats, R. S./Valentini, R./Bouwer, L. M./Georgopoulou, E./Jacob, D./Martin, E./Rounsevell, M./Soussana, J.-F. (2014): Europe, in: Barros, V. R./Field, C. B./Dokken, D. J./Mastrandrea, M. D./Mach, K. J./Bilir, T. E./Chatterjee, M./Ebi, K. L./Estrada, Y. O./Genova, R. C./Girma, B./Kissel, E. S./Levy, A. N./MacCracken, S./Mastrandrea, P. R./White, L. L. (eds.), Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge/New York, pp. 1267–1326.  Google Scholar
  144. Lagarde, C. (2021): Climate change and central banking. Keynote speech at the ILF conference on Green Banking and Green Central Banking, Frankfurt/M.  Google Scholar
  145. Lamperti, F./Bosetti, V./Roventini, A./Tavoni, M. (2019): The public costs of climate-induced financial instability, in: Nature Climate Change, Vol. 9, pp. 829–835.  Google Scholar
  146. Lamperti, F./Dosi, G./Napoletano, M./Roventini, A./Sapio, A. (2018): Faraway, so close: Coupled climate and economic dynamics in an agent-based integrated assessment model, in: Ecological Economics, Vol. 150, pp. 315–339.  Google Scholar
  147. Macaire, C./Naef, A. (2022): Greening monetary policy: Evidence from the People’s Bank of China, in: Climate Policy, DOI: 10.1080/14693062.2021.2013153.  Google Scholar
  148. Matikainen, S./Campiglio, E./Zenghelis, D. (2017): The climate impact of quantitative easing. Grantham Research Institute on Climate Change and the Environment Policy Paper. https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2017/05/ClimateImpactQuant Easing_Matikainen-et-al.pdf.  Google Scholar
  149. Moessner, R. (2022): Effects of carbon pricing on inflation, CESifo WP 9563, Munich.  Google Scholar
  150. Monnin, P. (2018): Central banks and the transition to a low-carbon economy, Council of Economic Policies. Discussion Note.  Google Scholar
  151. Mukherjee, K./Ouattara, B. (2021): Climate and monetary policy: Do temperature shocks lead to inflationary pressures?, in: Climatic Change, Vol. 167, 32. https://doi.org/10.1007/s10584-021-03149-2.  Google Scholar
  152. Nordhaus, W./Sztorc, P. (2013): DICE 2013R: Introduction and User’s Manual, 2. ed., mimeo, Yale University.  Google Scholar
  153. Otto, F. E. L./Harrington, L./Frame, D./Boyd, E./Lauta, K./Wehner, M./Clarke, B./Raju, E./Boda, C./Hauser, M./James, R./Jones, R. (2020): Toward an inventory of the impacts of human-induced climate change, in: Bulletin of the American Meteorological Society, Vol. 101(11), pp. E1972–E1979.  Google Scholar
  154. Papoutsi, M./Piazzesi, M./Schneider, M. (2021): How unconventional is green monetary policy?, https://web.stanford.edu/~piazzesi/How_unconventional_is_green_monetary_ policy.pdf.  Google Scholar
  155. Rezai, A./Taylor, L./Mechler, R. (2013): Ecological macroeconomics: An application to climate change, in: Ecological Economics, Vol. 85, pp. 69–76.  Google Scholar
  156. Roncoroni, A./Battsiton, S./Farfan, E./Leonardo, L. O./Jaramillo, S. M. (2021): Climate risk and financial stability in the networks of banks and investment funds, in: Journal of Financial Stability, Vol. 54, 100870.  Google Scholar
  157. Schoenmaker, D. (2019): Greening monetary policy, VoxEU, 17. April 2019.  Google Scholar
  158. Semieniuk, G./Campiglio, E./Mercure, J.-F./Volz, U./Edwards, N. (2020): Low-carbon transition risks for finance, in: WIREs Climate Change, Vol. 11, pp. 1–24.  Google Scholar
  159. Stott, P. et al. (2016): Attribution of extreme weather and climate-related events, in: WIREs Climate Change, Vol. 7(1), pp. 23–41.  Google Scholar
  160. Stroebel, J./Wurgler, J. (2021): What do you think about climate finance?, in: Journal of Financial Economics, Vol. 142 (2), pp. 487–498.  Google Scholar
  161. United Nations (n.d.): What is climate change?, https://www.un.org/en/climatechange/what-is-climate-change.  Google Scholar
  162. Van Bekkum, S./Gabarro, M./Irani, R. M. (2017): Does a larger menu increase appetite? Collateral eligibility and credit supply, in: Review of Financial Studies, Vol. 31(3), pp. 943–979.  Google Scholar
  163. van’t Klooster, J./van Tilburg, R. (2020): Targeting a sustainable recovery with green TLTROs. Technical report, Positive Money Europe.  Google Scholar
  164. Vollmer, U. (2022): Monetary policy or macroprudential policies: What can tame the cycles?, in: Journal of Economic Surveys, Vol. 36(5), pp. 1510–1538.  Google Scholar
  165. Walsh, E. (2017): Monetary theory and policy, 4. ed., Cambridge, London.  Google Scholar
  166. Weitzman, M. L. (2012): GHG targets as insurance against catastrophic climate damages, in: Journal of Public Economic Theory, Vol. 14(2), pp. 221–244.  Google Scholar
  167. Work Stream on Climate Change (2021): Climate change and monetary policy in the euro area, European Central Bank, Occasional Paper Series, Frankfurt/M.  Google Scholar
  168. Zerbib, O. D. (2019): The effect of pro-environmental preferences on bond prices: Evidence from green bonds, in: Journal of Banking & Finance, Vol. 98, S. 39–60.  Google Scholar

Abstract

The article reviews the literature on the relationship between climate change and central bank policies. Central banks conduct monetary policy and are responsible for macroprudential supervision. The article focuses on the consequences of transition and physical risks for financial stability and price stability. It also asks what role central banks can play in slowing climate change and what implications climate change has for the future strategy and for the monetary policy framework of the Eurosystem.

Table of Contents

Section Title Page Action Price
Uwe Vollmer: Central Bank Policies and Climate Change. Where Do We Stand? 381
Abstract 381
I. Climate Change and Central Banks – the Issues 381
II. Core Elements of E-DSGE Models 385
III. Climate Change, Central Bank Policies, and Economic Stability 390
1. Transition Risks 390
1.1 Orderly vs. Drastic Transition 390
1.2 Quantitative Easing vs. Capital Requirements 391
1.3 Policy Coordination vs. Non-Coordination 392
1.4 Illegal CO2 Emissions 393
2. Physical Risks 393
2.1 Natural Disaster Reactions 394
2.2 Gradual Climate Change 395
2.3 Long-Term Effects 396
3. Transition and Physical Risks: Interim Conclusion 398
IV. Monetary Policy and the Fight Against Climate Change 398
V. Implications for the Eurosystem 403
VI. Conclusions 406
References 406

Contact

Duncker & Humblot GmbH Carl-Heinrich-Becker-Weg 9 12165 Berlin, Deutschland T: +49 30 790006-0

Quick Navigation

2024 Duncker & Humblot GmbH

Powered by CloudPublish

We use cookies to ensure that you get the best experience on our website. Learn more about how we use cookies.