A framework for central banks navigating political uncertainty in the transition

As central bankers have increasingly considered the impacts of climate change and a net zero transition on their mandates, analysis has focused on the challenges of the technical uncertainty presented by financial and climatic systems. This report builds on previous work by focusing on how uncertainty created by political systems affects central banks. Political uncertainty is not inherently negative. It is often a byproduct of the dynamism inherent in democratic political systems. However, it can generate practical challenges for central banks and create a risk that they will avoid action on certain topics relevant to their mandates. This report offers central bankers a framework for defining different types of political uncertainty and principles to enable them to cope and move forward.