Climate Change Mitigation: How Effective is Green Quantitative Easing?

The preferential treatment of green bonds

“…In a specific assessment of green QE, Ferrari and Nispi Landi (2021) find only a modestly positive impact on aggregate environmental performance. Similarly, Abiry et al (2021) document a small impact of QE, in particular in comparison to a carbon tax, which is similar to our results on collateral policy. Hong et al (2021) study sustainable investment mandates, which have a similar transmission mechanism, since they affect asset demand by financial intermediaries.…”

Structural Change and the Climate Risk Premium During the Green Transition

“…Calibrating the energy expenditure share in GDP, (ψ (A.21) in Appendix A.1), to 8% as in Grubb et al (2018) and taking an initial damage ratio of 2% gives an energy share in production of intermediates of ν = 0.63. A large range of values has been used for the elasticity of substitution between clean and dirty products in Abiry et al, 2021). We set ϵ = 3 but also consider values up to 10.…”

“…For the size of the two sectors, we set θ c = θ d = 0.5 so that the output ratio of the two sectors is determined by the relative price alone. We set the relative cost of clean energy to that of dirty energy (ψ E,c /ψ E,d ) to 1.5 following Abiry et al (2021) and Hambel et al (2021). The dirty energy cost parameter ψ E,d then follows from ) to the 2019 clean and fossil energy consumption in primary energy: 91.4 exajoules for clean energy and 490.1 exajoules for fossil energy (BP, 2021).…”