Financing for Green Transition

As the signals of an ecological and climate crisis are intensifying.

The surface temperature of our planet is already around 1.2C above pre industrial levels and is warming at an alarming rate.

Against this, researchers at the International Panel on Climate Change (IPCC), share with us their assessments that meeting the 1.5C target is possible, and yet it will require ""deep emissions reductions and ""rapid, far-reaching and unprecedented changes in all aspects of society."" The International Energy Agency calls to double the pace of energy efficiency progress towards green transition and notes that large scale financing mechanisms ought to be enacted.

Often alluded as a Tragedy of Horizon, climate change related risks had been regarded as the problems of long dure, to be tackled by future generations, leaving little motivation for the current cohorts. But this is no longer the case.

As the urgency of the anthropogenic climate crisis becomes more explicit, greening of the global financial system steps ahead in our agenda, central banks being no exception. In fact, pathways to a net zero emissions global economy are relatively well-studied and understood.

Yet, many of these studies focused mostly on green transition of the power sector and decarbonization of the industry, while financing of this transition and, particularly the potential role of the central banks, is a relatively neglected area in the design of the green policy infrastructure.

Thus, there is clearly an unavoidable need to deepen our knowledge on the design of a green central bank, that is, in the words of Dikau & Volz, 2018, a central bank that takes environmental risks including climate change into consideration in its actions.

It is the purpose of this research consortium to study the potential of greening of the monetary policy instruments, and set the stage for a new policy environment conducive to the struggle against climate change.