Can Green Quantitative Easing (QE) Reduce Global Warming?

The idea of a green QE (quantitative easing) programme has gained a lot of traction over the last years. It has been argued that by implementing such a programme central banks could contribute to the fight against climate change. Our recent research shows that a green QE programme that involves the purchase of green corporate bonds can indeed reduce global warming. The programme will be more effective if green investment responds strongly to changes in the interest rates. Yet, green QE cannot by itself prevent severe climate change: even with optimistic assumptions about the role of interest rates, the path of global atmospheric temperature is not very likely to change substantially by such a programme. Many other types of environmental policies and strategies are necessary to keep global warming close to 2° C.