Publication: Working Paper Series No. 119

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EBI is happy to announce a contribution of Prof. David Ramos Muñoz (Universidad Carlos III de Madrid), Prof. Antonio Cabrales (Universidad Carlos III de Madrid) and Prof. Anxo Sánchez (Universidad Carlos III de Madrid) in the EBI Working Paper Series No. 119. Their paper entitled “Central Banks and Climate Change: Fit, Opportunity and Suitability in the Law and Beyond” was published on 13th March 2022.

Central banks have for a long time been absent from the fight against climate change. No longer. However, this newly gained perspective opens more questions than it answers. Can central banks input climate change into their mandate? Can they sidestep it? And what are the limits either way? This paper explores the answers to these questions from the perspective of both the central banks, and the courts called to adjudicate if the issue is litigated. To provide such answers we use an analytical approach, where we distinguish between arguments of “fit”, which analyze whether central banks can tackle climate change in light of their mandates; arguments of “opportunity” that analyze when central banks may, or should, act; and arguments of “suitability” that analyze how central banks may (and may not) intervene. This distinction clarifies a large part of the discussion, showing that climate change considerations fit within central banks mandate, that the asymmetrical nature of the consequences resulting from acting now v. waiting favors acting now, and that the challenges lie mostly on which levers to pull, or which instruments to use, and how to communicate the message. Central banks’ new awareness of climate change calls for a strengthening of independence, and an enhancement of dialogue and transparency.

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