ECB economists: important role for central banks in responding to climate change.

In an article for VoxEU, economists from the European Central Bank (ECB) discuss the role that monetary policy can play in facilitating the transition to a low-carbon economy. The authors argue that the range of policy options is wide – from protective measures, such as reducing the weight of stranded assets on central bank balance sheets, to proactive measures involving the “greening” of quantitative easing programmes. According to the article, several factors impact how central banks engage with climate change, including their mandate and the operational frameworks that establish the broader institutional context within which climate change effects can be internalised. As central banks are increasingly called upon to address the climate change challenge, understanding the credibility and efficacy of the policy options will become a critical task.