Macroeconomic and Financial Policies for Climate Change Mitigation: A Review of the Literature

Abstract

Climate change is one of the greatest challenges of this century. Mitigation requires a large-scaletransition to a low-carbon economy. This paper provides an overview of the rapidlygrowing literature on the role of macroeconomic and financial policy tools in enabling thistransition. The literature provides a menu of policy tools for mitigation. A key conclusion isthat fiscal tools are first in line and central, but can and may need to be complemented byfinancial and monetary policy instruments. Some tools and policies raise unansweredquestions about policy tool assignment and mandates, which we describe. The literature is scarce, however, on the most effective policy mix and the role of mitigation tools and goalsin the overall policy framework.

Keywords: Financial regulation and supervision, Financial crises, Central banking and monetary issues, Economic conditions, Financial management, climate change, fiscal policy, monetary policy, financial policy, policy framework, policy coordination, WP, low-carbon, climate change mitigation, policy tool, climate-related, mitigation

JEL Classification: Q54, E52, E60, E61, E62, G10, G20, E01, G21, F16,