Green Quantitative Easing as Intergenerational Climate Justice: On Political Theory and Pareto Efficiency in Reversing Now Human-Caused Environmental Damage

The present paper endorses an interdisciplinary approach to the complex and urgent issue of intergenerational climate justice, and proposes a rich menu of policy options, in particular some novel and unconventional ones, to resolve it immediately but flexibly. We incorporate the realistic features of economic growth, nominal interest, expected inflation, and the option for nonrepayment or partial repayment of public debt across generations as well as a central bank institution, or rather the global network of central banks, to implement climate mitigation policy in the stylized model proposed by Sachs (2015). Similarly, but even without repayment, we find such kind of policy, which we label 'green quantitative easing', or 'green QE', to be Pareto-efficient across generations. Differently, we argue that neither the present, nor future generations need to repay the novel greening compensatory transfers (GCTs) to households and firms we envisage to serve as a main financial instrument of central banks in triggering a decisive reversal in environmental deterioration right now, without further delay, given the emergency of the situation. Moreover, and in support of the economic considerations and incentives, we argue from philosophical, legal and political-theory grounds that such a financial scheme intermediated by central banks worldwide serves two types of principles of intergenerational climate justice: (i) principles that tell us to mitigate climate change now and avoid harm for future generations; and (ii) principles that tell us how to share mitigation costs fairly across generations. Our spectrum of suggested pragmatic green QE initiatives includes potential issuance by firms and households of super-long-term coupon bonds to be held by central banks over up to a century, possibly GCT-based only, and allows for much flexibility and complementarity in the practical solutions to be potentially chosen, with voluntary partial repayment or not of the mitigation costs across generations.