Walking a Tightrope: Financial Regulation, Climate Change, and the Transition to a Low-Carbon Economy

Dimitri Demekas and Pierpaolo Grippa

Journal of Financial Regulation, 2022, vol. 8, issue 2, 203-229

Abstract: As with the global financial crisis, there are once again demands on central banks and financial regulators to take on new responsibilities, this time for supporting the transition to a low-carbon economy. Regulators can indeed facilitate the reorientation of financial flows necessary for the transition. But they may find themselves walking a tightrope, having to balance exaggerated expectations against limited capabilities and political economy constraints. Their diagnostic and policy toolkits are still in their infancy. Expanding their legal mandates to take on these new, essentially political, responsibilities should be done through the political process and be accompanied by strengthened governance and accountability arrangements. Taking on these new responsibilities can also have potential pitfalls and unintended consequences on financial markets. Ultimately, central banks and financial regulators cannot deliver a low-carbon economy by themselves and should not risk being caught again in the role of ‘the only game in town’.

Keywords: financial stability; financial regulation; climate change; climate mitigation policy; low-carbon economy; energy transition (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/jfr/fjac010 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Walking a tightrope: financial regulation, climate change, and the transition to a low-carbon economy (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:refreg:v:8:y:2022:i:2:p:203-229.

Access Statistics for this article

Journal of Financial Regulation is currently edited by Dan Awrey, Geneviève Helleringer and Wolf-Georg Ringe

More articles in Journal of Financial Regulation from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().