Working Paper: CEPR ID: DP17324
Authors: Raphael Abiry; Marien Ferdinandusse; Alexander Ludwig; Carolin Nerlich
Abstract: We develop a two sector incomplete markets integrated assessment model to analyze the effectiveness of green quantitative easing (QE) in complementing fiscal policies for climate change mitigation. We model green QE through an outstanding stock of private assets held by a monetary authority and its portfolio allocation between a clean and a dirty sector of production. Green QE leads to a partial crowding out of private capital in the green sector and to a modest reduction of the global temperature by 0.04 degrees of Celsius until 2100. A moderate global carbon tax of 50 USD per tonne of carbon is 4 times more effective.
Keywords: climate change; integrated assessment model; 2-sector model; green quantitative easing; carbon taxation
JEL Codes: E51; E62; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| green quantitative easing (QE) (E62) | crowding out of private capital in the green sector (P18) |
| crowding out of private capital in the green sector (P18) | modest reduction of global temperature (Q54) |
| green quantitative easing (QE) (E62) | modest reduction of global temperature (Q54) |
| carbon tax (H23) | reduction of temperature increases (H23) |
| green quantitative easing (QE) + carbon tax (Q58) | temperature reduction (H23) |
| $50 carbon tax (H23) | temperature reduction (H23) |