The Crossover between Climate Politics and Central Banking: How Green Central Banking Emerged in the US, the EU, and the UK

• Published date: 01 December 2024
• DOI: http://doi.org/10.1177/00323292241246357
• Author: Nicolas Jabko,Nils Kupzok
• Date: 01 December 2024
• Subject Matter: Articles

The Crossover between

Climate Politics and Central

Banking: How Green Central

Banking Emerged in the US,

the EU, and the UK

Nicolas Jabko

Johns Hopkins University

Nils Kupzok

Johns Hopkins University School of Advanced International Studies

Abstract

Climate change has emerged on the agenda of central bankers. We argue that the rise

of green central banking resulted from a crossover between climate politics after the

2015 Paris Climate Agreement and central banking after the 2008 f‌inancial crisis.

Actors in these unconnected f‌ields constructed and exploited this new linkage to

their advantage. In the wake of the Paris Agreement, climate advocates promoted

green central banking as part of a broader push for climate action beyond typical cli-

mate policy. Central bankers, in turn, endorsed green central banking to shore up

political support. After their post-2008 unconventional monetary policies had alien-

ated many right-wing backers, central bankers needed to make their policies more

broadly appealing. This logic prevailed to varying degrees in the European Union

and the United Kingdom, thanks to a new openness to climate action. In the

United States, however, political polarization around the climate issue set clear limits

to the crossover.

Keywords

central banking, climate change, green central banking

Corresponding Author:

Nils Kupzok, Johns Hopkins University School of Advanced International Studies, 555 Pennsylvania Avenue,

Washington, DC, USA.

Email: nkupzok1@jhu.edu

Article

Politics & Society

2024, Vol. 52(4) 662–690

© The Author(s) 2024

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/00323292241246357

journals.sagepub.com/home/pas

After 2015, central bankers around the globe put climate change on their agenda and

took steps toward “greening”their policies.

1

If we listen to central bankers’speeches,

they simply acted on new information about climate-related f‌inancial risks. Scholars of

political science tend to see green central banking as a more political reality—an

expression of broader ideational change, or of the evolving demands of the f‌inancial

sector. Although new information, new ideas, and f‌inancial interests all played a

role in the rise of green central banking, they each run into diff‌iculties in explaining

its timing and unevenness. First, the greening of central bank policies came surprisingly

late. Green central banking emerged three decades after political leaders had agreed on

a call to green f‌inance at the 1992 UN summit in Rio.

2

It came years or even arguably

decades after new climate policy ideas emerged, and none of the information that

central bankers cite to justify their imperative to act green is especially new. In addition

to being late, the rise of green central banking remained uneven. For example, the ECB

and the Bank of England moved more aggressively than the Fed toward greener pol-

icies. This unevenness is puzzling because central bankers constitute a close-knit inter-

national community that shares broad epistemic commitments and that enjoys a broad

degree of independence.

This article purports to resolve the dual puzzle of lateness and unevenness by

explaining the rise of green central banking as the outcome of a crossover between

climate politics and central banking. First, we demonstrate that green central

banking resulted from a crossover between climate politics after the 2015 Paris

Climate Agreement and “unconventional”central banking after the 2008 f‌inancial

crisis. The push for green central banking and green f‌inance went from niche to main-

stream following the Paris Agreement. The Paris Agreement did not only set more

ambitious climate targets for the global community. It was also part of a broader

shift in climate advocacy, aiming to recruit new actors for climate action who had pre-

viously been on the periphery of climate politics—including central bankers. At the

same time, the backlash against “unconventional”monetary policy prompted central

bankers to shore up political support. “Green central banking”emerged at this intersec-

tion, both as a new policy agenda for climate advocates and as an opportunity for

central bankers to expand political support and def‌lect criticisms.

Second, we explain the uneven adoption of green central banking by the European

Central Bank, the Bank of England, and the US Federal Reserve—three otherwise

similar central banks insofar as they enjoy a high level of independence and together

lead the international central banking community. We identify as a key source of var-

iation the political context of central banking and, more specif‌ically, the degree of par-

tisan contestation over climate change policy. In the United States’highly polarized

political environment, there were limits to the central bankers’capacity to respond

to green political demands without losing crucial conservative and business support.

By contrast, the European Central Bank and the Bank of England were able to go

further because there were fewer political costs associated with the green turn.

Our argument rests on a historical narrative of climate politics and central banking

in the 2010s, building on primary and secondary sources, followed by a focused com-

parison of green central banking in three selected cases. While the Bank of England

and the ECB are global leaders in terms of green central banking, the US Fed is an

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