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Climate Change Mitigation: How Effective is Green Quantitative Easing?

Author

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

Abstract

We develop a two sector incomplete markets integrated assessment model to analyze the effectiveness of green quantitative easing (QE) in complementing fiscal policies for climate change mitigation. We model green QE through an outstanding stock of private assets held by a monetary authority and its portfolio allocation between a clean and a dirty sector of production. Green QE leads to a partial crowding out of private capital in the green sector and to a modest reduction of the global temperature by 0.04 degrees of Celsius until 2100. A moderate global carbon tax of 50 USD per tonne of carbon is 4 times more effective.

Suggested Citation

  • Abiry, Raphael & Ferdinandusse, Marien & Ludwig, Alexander & Nerlich, Carolin, 2022. "Climate Change Mitigation: How Effective is Green Quantitative Easing?," CEPR Discussion Papers 17324, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17324
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    2. Paolo Angelini, 2024. "Portfolio decarbonisation strategies: questions and suggestions," Questioni di Economia e Finanza (Occasional Papers) 840, Bank of Italy, Economic Research and International Relations Area.
    3. Kubin, Ingrid & Zörner, Thomas O., 2024. "Financial and fiscal environmental regulation in a credit cycle model," Department of Economics Working Paper Series 373, WU Vienna University of Economics and Business.
    4. Maurizio Solari & Alexandre Le Bloc’h & Sergio Rossi, 2024. "Ecological transition in a monetary economy of production: a heterodox approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(1), pages 13-37, March.
    5. Alessandro Ferrari & Valerio Nispi Landi, 2023. "Toward a Green Economy: The Role of the Central Bank’s Asset Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 19(5), pages 287-340, December.
    6. Takuji Fueki & Yutaka Soejima & Shunichi Yoneyama, 2022. "New Dimensions and Frontiers in Central Banking Summary of the 2022 BOJ-IMES Conference," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 40, pages 1-20, November.
    7. Carattini, Stefano & Kim, Giseong & Melkadze, Givi & Pommeret, Aude, 2024. "Carbon taxes and tariffs, financial frictions, and international spillovers," European Economic Review, Elsevier, vol. 170(C).
    8. Patrick Gruning, 2022. "Fiscal, Environmental, and Bank Regulation Policies in a Small Open Economy for the Green Transition," Working Papers 2022/06, Latvijas Banka.
    9. Masciandaro, Donato & Russo, Riccardo, 2024. "Monetary and macroprudential policies: How to Be green? A political-economy approach," Economic Modelling, Elsevier, vol. 141(C).
    10. Marcinkowska, Monika & Brzeszczyński, Janusz & Charteris, Ailie & Gajdka, Jerzy & Obojska, Lidia & Szczygielski, Jan Jakub, 2025. "Sustainability, energy finance and the role of central banks: A review of current insights and future research directions," Energy Economics, Elsevier, vol. 144(C).
    11. Le, Anh H. & Uddin, Gazi Salah & Lucey, Brian, 2024. "Green targeted lending operations in the Euro Area," Economics Letters, Elsevier, vol. 243(C).
    12. Patrick Gruning & Zeynep Kantur, 2024. "Financial Intermediation and Climate Change in a Production and Investment Network Model for the Euro Area," Working Papers 2024/06, Latvijas Banka.
    13. Grüning, Patrick, 2025. "Fiscal, environmental, and bank regulation policies in a small open economy for the green transition," Resource and Energy Economics, Elsevier, vol. 82(C).
    14. Le, Anh H., 2025. "Climate change and Carbon policy: A story of optimal green macroprudential and capital flow management," Energy Economics, Elsevier, vol. 146(C).
    15. George Economides & Anastasios Xepapadeas, 2025. "Monetary policy stabilization in a new Keynesian model under climate change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 56, April.
    16. Takuji Fueki & Yutaka Soejima & Shunichi Yoneyama, 2022. "New Dimensions and Frontiers in Central Banking Summary of the 2022 BOJ-IMES Conference," IMES Discussion Paper Series 22-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
    17. Francesco Giovanardi & Matthias Kaldorf & Lucas Radke & Florian Wicknig, 2023. "The Preferential Treatment of Green Bonds," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 657-676, December.
    18. Ferrari, Alessandro & Nispi Landi, Valerio, 2024. "Whatever it takes to save the planet? Central banks and unconventional green policy," Macroeconomic Dynamics, Cambridge University Press, vol. 28(2), pages 299-324, March.
    19. Attílio, Luccas Assis & Faria, João Ricardo & Rodrigues, Mauro, 2023. "Does monetary policy impact CO2 emissions? A GVAR analysis," Energy Economics, Elsevier, vol. 119(C).
    20. Nickel, Christiane & Kilponen, Juha & Moral-Benito, Enrique & Koester, Gerrit & Ciccarelli, Matteo & Enders, Almira & Holton, Sarah & Landau, Bettina & Venditti, Fabrizio & Bobeica, Elena & Brand, Cla, 2025. "A strategic view on the economic and inflation environment in the euro area," Occasional Paper Series 371, European Central Bank.
    21. Aloui, Donia & Benkraiem, Ramzi & Guesmi, Khaled & Vigne, Samuel, 2023. "The European Central Bank and green finance: How would the green quantitative easing affect the investors' behavior during times of crisis?," International Review of Financial Analysis, Elsevier, vol. 85(C).

    More about this item

    Keywords

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    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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