The climate impact of quantitative easing - Grantham Research Institute on climate change and the environment<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/the-climate-impact-of-quantitative-easing\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The climate impact of quantitative easing - Grantham Research Institute on climate change and the environment\" \/>\n<meta property=\"og:description\" content=\"Note that an 8-page policy brief for decision-makers that draws on the full 36-page paper is available. 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{"id":23853,"date":"2017-05-30T00:01:04","date_gmt":"2017-05-29T23:01:04","guid":{"rendered":"https:\/\/www.lse.ac.uk\/granthaminstitute\/?post_type=publication&p=23853"},"modified":"2024-08-19T14:28:20","modified_gmt":"2024-08-19T13:28:20","slug":"the-climate-impact-of-quantitative-easing","status":"publish","type":"publication","link":"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/the-climate-impact-of-quantitative-easing\/","title":{"rendered":"The climate impact of quantitative easing"},"content":{"rendered":"\n

Note that an 8-page policy brief for decision-makers that draws on the full 36-page paper is available. <\/em><\/p>\n

Headline issue<\/strong><\/p>\n

Both climate change and the low-carbon transition are likely to have deep implications for the functioning and stability of the macro financial system. The discussion of possible risks has largely focused on the private sector; however, this paper argues that central banks should also consider how their operation of monetary policy could affect the transition to a low-carbon economy. Even supposedly market-neutral interventions by central banks may show an unintended structural bias towards carbon-intensive industry incumbents.<\/p>\n

Key messages<\/strong><\/p>\n

\n
Sectoral analysis of the quantitative easing (QE) corporate bond purchase programmes of the European Central Bank (ECB) and the Bank of England suggests a skew towards high-carbon sectors. For example, it is estimated that utilities, the most carbon-intensive sector by emissions, make up the largest share of purchases for both banks.<\/li>\n
This carbon-intensive skew raises concerns of disproportionately increasing prices and encouraging additional debt issuance in high-carbon relative to low-carbon sectors. The purchase of such assets is in direct contradiction with, and may undermine, the signals that financial regulators are making about the risks associated with high-carbon investments.<\/li>\n<\/ul>\n
Recommendations<\/strong><\/p>\n
\n
The European Central Bank and Bank of England should increase transparency around the purchases and selection process.<\/li>\n
Central banks should investigate the impact of their interventions on both high-carbon and low-carbon investment.<\/li>\n
The European Central Bank and Bank of England could consider options for changing their purchasing strategies, by revising eligibility criteria and using monetary policy more effectively to support long-term sustainable growth.<\/li>\n
Central banks should communicate and coordinate with fiscal policy-makers and financial regulators.<\/li>\n<\/ol>\n\n","protected":false},"excerpt":{"rendered":"\n
Note that an 8-page policy brief for decision-makers that draws on the full 36-page paper is available. 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