{"title":"“Climate Bailout”: a new tool for central banks to limit the financial risk resulting from climate change","authors":"","doi":"10.1007/s10784-024-09630-4","DOIUrl":null,"url":null,"abstract":"<h3>Abstract</h3> <p>To achieve the climate goals of the Paris Agreement, the bulk of identified fossil fuel resources cannot be burned and have to stay in the ground. This fact leads to a situation where a significant part of the fossil fuels already recorded in company balance sheets will become stranded assets in the near future. Since 2015, central banks have identified climate change as a large risk for financial stability, stranded assets constituting a significant element of this risk. To protect the economy from this risk, central banks need novel tools. The aim of this paper is to outline a new “climate bailout” tool which would enable fossil fuel industry actors, both in the Global North and Global South to sell their potentially stranded assets to central banks (mainly from the Global North) upon committing themselves to invest the received money into new and additional renewable energy (RE). Multilateral development banks and other development finance institutions would support this process, while central banks would take a new kind of long-term, low-yield green climate asset onto their balance sheets. The newly financed RE would substitute for lost fossil fuel energy supply and stabilise related prices. We demonstrate that a climate bailout would not only be in line with the general mandates of central banks, namely maintaining price stability and preserving the stability of the financial sector, but would also provide a new tool for central banks to counter fossil fuel price shock-induced inflation (fossilflation). We show how countries both from the Global South and the Global North could benefit from the implementation of this new financial tool.</p>","PeriodicalId":47272,"journal":{"name":"International Environmental Agreements-Politics Law and Economics","volume":"36 1","pages":""},"PeriodicalIF":2.9000,"publicationDate":"2024-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Environmental Agreements-Politics Law and Economics","FirstCategoryId":"90","ListUrlMain":"https://doi.org/10.1007/s10784-024-09630-4","RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
To achieve the climate goals of the Paris Agreement, the bulk of identified fossil fuel resources cannot be burned and have to stay in the ground. This fact leads to a situation where a significant part of the fossil fuels already recorded in company balance sheets will become stranded assets in the near future. Since 2015, central banks have identified climate change as a large risk for financial stability, stranded assets constituting a significant element of this risk. To protect the economy from this risk, central banks need novel tools. The aim of this paper is to outline a new “climate bailout” tool which would enable fossil fuel industry actors, both in the Global North and Global South to sell their potentially stranded assets to central banks (mainly from the Global North) upon committing themselves to invest the received money into new and additional renewable energy (RE). Multilateral development banks and other development finance institutions would support this process, while central banks would take a new kind of long-term, low-yield green climate asset onto their balance sheets. The newly financed RE would substitute for lost fossil fuel energy supply and stabilise related prices. We demonstrate that a climate bailout would not only be in line with the general mandates of central banks, namely maintaining price stability and preserving the stability of the financial sector, but would also provide a new tool for central banks to counter fossil fuel price shock-induced inflation (fossilflation). We show how countries both from the Global South and the Global North could benefit from the implementation of this new financial tool.
期刊介绍：
International Environmental Agreements: Politics, Law and Economics is a peer-reviewed, multi-disciplinary journal that focuses on the theoretical, methodological and practical dimensions of achieving cooperative solutions to international environmental problems. The journal, which is published four times each year, emphasizes both formal legal agreements (such as multilateral treaties) and less formal cooperative mechanisms (such as ministerial declarations and producer-consumer agreements). The journal''s scope encompasses the full range of environmental and natural resource issues, including (but not limited to) biosafety, biodiversity loss, climate change, desertification, forest conservation, ozone depletion, transboundary pollutant flows, and the management of marine and fresh-water resources. The editors welcome contributions that consider stakeholder initiatives and the role of civil society in the definition and resolution of environmental conflicts. The journal provides a forum on the role of political, economic, and legal considerations in the negotiation and implementation of effective governance strategies. Special emphasis is attached to the following substantive domains: The normative aspects and political economy of treaty negotiations and multilateral agreements, including equity considerations; Methodologies for evaluating the effectiveness of alternative governance mechanisms; The role of stakeholder initiatives and civil society in the definition and resolution of environmental conflicts; The harmonization of environmental strategies with prevailing social, political, and economic institutions.
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