Financial Regulation, Climate Change, and the Transition to a Low-Carbon Economy: A Survey of the Issues

Dimitri Demekas and Pierpaolo Grippa

No 2021/296, IMF Working Papers from International Monetary Fund

Abstract: There are demands on central banks and financial regulators to take on new responsibilities for supporting the transition to a low-carbon economy. Regulators can indeed facilitate the reorientation of financial flows necessary for the transition. But their powers should not be overestimated. Their diagnostic and policy toolkits are still in their infancy. They cannot (and should not) expand their mandate unilaterally. Taking on these new responsibilities can also have potential pitfalls and unintended consequences. Ultimately, 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; carbon price; green finance; United Nations climate change conference; policy coordination; unintended consequence; Climate change; Global (search for similar items in EconPapers)
Pages: 45
Date: 2021-12-17
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ene, nep-env and nep-fdg
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