SAFE Working Paper No. 376

Climate Change Mitigation: How Effective is Green Quantitative Easing?

We develop a two-sector incomplete markets integrated assessment model to analyze

the eectiveness of green quantitative easing (QE) in complementing scal 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