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
eective.
