Policy Briefs

In this brief, we ask whether the implementation of national climate policies may spur a global race to protectionism. Consumer or production subsidies and border carbon adjustments may have positive mitigation effects but can also generate trade distortions and give national industries a competitive advantage against foreign firms.

Climate stress tests were built to assess climate systemic risk in the financial system. They demand resources from supervisors and banks alike, but are proving useful to inform macroprudential policies.

Climate change has a destabilizing effect on financial markets. If market actors become overexposed to climate-sensitive assets, the ensuing market failure provides justification for central bank intervention to prevent cascading financial effects.

To secure price stability and fulfill their primary mandate, policymakers should act promptly: interest rate management, expectation anchoring, financial stabilization, cooperation with fiscal authorities are just some of the tools at their disposal.

Donate Now