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

IMF Working Papers, September 4, 2019

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

Climate change is characterized as "one of the greatest challenges of this century."
Mitigation requires "a large-scale transition to a low-carbon economy."
The paper provides "an overview of the rapidly growing literature on the role of macroeconomic and financial policy tools in enabling this transition."
The literature offers "a menu of policy tools for mitigation."
A key conclusion: "fiscal tools are first in line and central, but can and may need to be complemented by financial and monetary policy instruments."
Some tools and policies "raise unanswered questions about policy tool assignment and mandates."
The literature is "scarce" on:
- "the most effective policy mix"
- "the role of mitigation tools and goals in the overall policy framework"

Fiscal tools:
- Identified as central and primary for mitigation.
Financial policy instruments:
- May be needed to complement fiscal measures.
Monetary policy instruments:
- May also play a complementary role alongside fiscal and financial policies.
Open issues flagged by the literature:
- Assignment of specific policy tools to authorities.
- Mandates of policy institutions when mitigation objectives are included.
- Coordination across fiscal, financial, and monetary policies.
- Evidence gaps on optimal policy mixes and integration into overall policy frameworks.

Subjects listed: Carbon tax; Climate change; Climate policy; Environment; Expenditure; Greenhouse gas emissions; Public investment and public-private partnerships (PPP); Taxes.
Keywords listed: adaptation policy; Carbon tax; Climate change; Climate policy; climate policy gain; distributive policy risk; financial policy; fiscal policy; Global; government failure; Greenhouse gas emissions; climate change; mitigation policy; monetary policy; monetary policy tool; policy authorities; policy coordination; policy framework; Policy instrument; Policy mix; policy risk; Policy tool; Public investment and public-private partnerships (PPP); technology policy; WP.