A framework for central banks navigating political uncertainty in the transition
This report from the Centre for Economic Transition Expertise (CETEx) highlights the three different types of political uncertainty central bankers face in their work: domestic, transnational and dynamic. Each type is encountered in the context of climate change and a green transition. For instance, there may be uncertainty over how the climate priorities of present or future governments may shift through democratic change (domestic). Similarly, the possibility of political shifts on climate policy in other countries can also impact any given central bank (transnational). Central banks may further be concerned about the potential political effects of any financial risk mitigation policies they undertake on climate change, and how these might be viewed by their government or other political actors (dynamic). While first cautioning against inaction, this report recommends three principles for coping with political uncertainty.