During the 2008 financial crisis, central banks deployed unconventional means to rescue failing banks and insulate economies from depression. Their asset purchases have had strong social impacts, but traditionally, central banks have not explicitly factored social objectives into their decisions or evaluated their impacts beyond the narrow monetary domain.
In this paper Andrew Sheng argues that central banks, when purchasing financial assets, should consider selecting assets that will promote sustainability, including climate change mitigation and adaptation. Social impact investing he argues is consistent with a central bank’s mandate to maintain price stability. They could incentivize bankers and asset managers to invest in, or lend to, climate mitigation activities and low-emission growth.
Policy-driven institutions such as national development banks (NDBs) and national green funds (NGFs) attract a growing interest to provide grants, credit-enhancement instruments or lend directly to project proponents in specific green sectors, with billions of dollars allocated by governments to support these interventions.
As part of ongoing efforts to better understand their comparative effectiveness to deepen national financial systems, the paper discusses the role of NGFs in catalysing institutional innovations and facilitating access to long-term affordable finance for green, low carbon and climate resilient investment. It argues that the key added value of NGFs might rest in their capacity to foster institutional innovations and partner with other financial and regulatory institutions to increase the diversity and depth of local financial markets in order to enhance the domestic supply of green finance.
The role of fiscal instruments in supporting action on climate change is increasingly recognized. A number of climate related fiscal instruments have been adopted across the world including taxes or charges on fossil fuel energy, carbon pricing mechanisms, fossil fuel subsidy reforms, fiscal incentives and subsidies for renewable energy. Fiscal policy reforms play an important role in ensuring effective and efficient action on climate change. This briefing paper summarizes recent work carried out on the topic by the Green Fiscal Policy Network, and offers reflections from Network members on how fiscal policy reforms can support action on climate change.
This paper provides a regional, empirical analysis of policy portfolios that aim to contribute towards a ‘Green Energy Economy’ (GEE) transformation. Taking green economy policies and related indicators as the analytical framework, the study examines (i) the composition of policy portfolios promoting low-carbon energy technologies, (ii) short-term trends related to the GEE, (iii) long-term empirical observations of GEE-related factors, and (iv) whether, given these results, CO2 emission reduction targets can be met. The study focuses on the following regions: Africa, Asia, Latin America and the Caribbean, the Middle East, Non-OECD Europe and countries from the Former Soviet Union, Oceania, OECD Europe, and OECD North America. Findings reveal that low-carbon energy technology policies have spread rapidly since the 2000s. Economics incentives are widespread across all regions, highlighting the growing use of market-based policies. The short-term analysis shows that per capita income growth (and to a lesser extent population growth) are the main obstacles to transition towards a GEE transformation.
This synthesis article reviews China's efforts and effects concerning low-carbon green growth (LCGG) and explores the policy implications of reformulating the country's LCGG strategy. The article first reviews China's efforts in four major areas – carbon mitigation, market construction, fostering green industries, and managing the negative effects of LCGG – and then reviews China's LCGG effects with respect to the growth effect and the low-carbon effect. The results show that the increasingly stringent low-carbon policy has not diminished the country's economic growth as some had expected. Rather, the policy has fostered green industries and brought impressive quality improvements, including structural change and increased employment. Although the efforts and effects in China are impressive, the global emissions reduction is far from sufficient to achieve the global climate change target.