Financing a low-carbon revolution

Abstract

ABSTRACT Financial markets can and should become key drivers in achieving a rapid transition to a low-carbon economy. If they fail to do so, the risk of catastrophic climate change appears ever more likely. Since markets alone will not provide the necessary incentives for action of the magnitude required, or within the short window of opportunity that remains, governments must act. While imposing a price on carbon is essential, political constraints have precluded strong action. Central banks and financial regulators must step into this policy vacuum. By pulling a number of well-designed policy levers they could make a powerful contribution toward delivering a low-carbon and climate-resilient economy. By doing so they could trigger a quiet revolution involving massive investments now in long-lived, low-carbon assets and in infrastructure that is resilient to the physical impacts of global heating.