Climate change mitigation: how effective is green quantitative easing?

  • 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.

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Author:Raphael AbiryGND, Marien FerdinandusseGND, Alexander LudwigORCiDGND, Carolin NerlichGND
Parent Title (German):SAFE working paper ; No. 376
Series (Serial Number):SAFE working paper (376)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2022
Year of first Publication:2022
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2023/01/02
Tag:2-Sector Model; Carbon Taxation; Climate Change; Green Quantitative Easing; Integrated Assessment Model
Issue:December 9, 2022
We gratefully acknowledge funding of this research project through INSPIRE, Climateworks Foundation.
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:E Macroeconomics and Monetary Economics / E5 Monetary Policy, Central Banking, and the Supply of Money and Credit / E51 Money Supply; Credit; Money Multipliers
E Macroeconomics and Monetary Economics / E6 Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / E62 Fiscal Policy
Q Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Q5 Environmental Economics / Q54 Climate; Natural Disasters; Global Warming
Licence (German):License LogoDeutsches Urheberrecht