The Crossover between Climate Politics and Central Banking: How Green Central Banking Emerged in the US, the EU, and the UK

Abstract

Climate change has emerged on the agenda of central bankers. We argue that the rise of green central banking resulted from a crossover between climate politics after the 2015 Paris Climate Agreement and central banking after the 2008 financial crisis. Actors in these unconnected fields constructed and exploited this new linkage to their advantage. In the wake of the Paris Agreement, climate advocates promoted green central banking as part of a broader push for climate action beyond typical climate policy. Central bankers, in turn, endorsed green central banking to shore up political support. After their post-2008 unconventional monetary policies had alienated many right-wing backers, central bankers needed to make their policies more broadly appealing. This logic prevailed to varying degrees in the European Union and the United Kingdom, thanks to a new openness to climate action. In the United States, however, political polarization around the climate issue set clear limits to the crossover.