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Green QE and carbon pricing: looking at potential tools to fight climate change

Author

Listed:
  • Abiry, Raphael
  • Ferdinandusse, Marien
  • Ludwig, Alexander
  • Nerlich, Carolin

Abstract

While there is broad consensus that carbon pricing is an effective instrument for combatting climate change, the potential contribution of central banks is still debated. Central banks around the world have adopted different strategies to consider climate change in their monetary policy frameworks. This article focuses on green quantitative easing (QE). Compared with a carbon tax, we find that green QE would contribute only moderately to reducing global temperatures, while partially crowding out green private investment. However, green QE could serve as a complementary instrument, especially if governments fail to coordinate on introducing a sufficiently ambitious carbon tax on the global scale. JEL Classification: E51, E62, Q54

Suggested Citation

  • Abiry, Raphael & Ferdinandusse, Marien & Ludwig, Alexander & Nerlich, Carolin, 2022. "Green QE and carbon pricing: looking at potential tools to fight climate change," Research Bulletin, European Central Bank, vol. 99.
    • Handle: RePEc:ecb:ecbrbu:2022:0099:
    Note: 673741
    as

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    Citations

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    Cited by:

    1. Committeri, Marco & Brüggemann, Axel & Kosterink, Patrick & Reininger, Thomas & Stevens, Luc & Vonessen, Benjamin & Zaghini, Andrea & Garrido, Isabel & Van Meensel, Lena & Strašuna, Lija & Tiililä, Ne, 2022. "The role of the IMF in addressing climate change risks," Occasional Paper Series 309, European Central Bank.

    More about this item

    Keywords

    Carbon Tax; Climate Change; Green Quantitative Easing; Integrated Assessment Model;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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