“Central banks can design green credit policy instruments to potentially bring down inflation while also making allocative choices in support of the low-carbon transition.
This paper draws on examples of policy made at the German Bundesbank and other central banks which sought to protect some sectors during a tightening cycle in ways that are compatible with market liberalism and central bank independence.”
[COMMENTARY] The idea of central banks engaging in climate finance requires a ‘buy-in’ of the financial, business, and political communities. Until the majority of participants in those communities believe in the urgency of climate change, it’ll be difficult to get central bank financial participation. Often, central bank charters will need legislative approval too.
Using green credit policy to bring down inflation: what central bankers can learn from history, by Jens van ‘t Klooster and Eric Monnet, July 24, 2023, London School of Economics, UK.