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Beyond market neutrality? Central banks and the problem of climate change

Published online by Cambridge University Press:  09 November 2023

Matthias Thiemann ,
Tim Büttner  and
Oliver Kessler
Matthias Thiemann*
Affiliation:
Sciences Po, France
Tim Büttner
Affiliation:
Independent researcher, Germany
Oliver Kessler
Affiliation:
University of Erfurt, Germany
*
Corresponding author: Matthias Thiemann, Sciences Po Centre des Etudes Européennes, 27 rue Saint-Guillaume, 75006 Paris, France. Email: matthias.thiemann@sciencespo.fr.
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Abstract

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Starting with a landmark speech by Mark Carney on the ‘Tragedy of the Horizon’ in 2015, climate change entered central banking discourse, causing some of its key convictions to come under new scrutiny. This article traces how initially climate change was firmly embedded in a conventional framework of ‘market completion’ that would allow financial markets to price in negative externality. Yet, over the course of the last seven years, central banks have repositioned their role regarding this problem, taking on a much more active stance, which calls into question the notion of ‘market neutrality’. To trace these discursive changes, this article identifies three discursive layers formed around market-based mechanisms, responsible investment and monetary policy. We show that in the unfolding of the debate, the issue of climate change has altered the self-understanding of central bankers and driven them towards a more active stance where they acknowledge that central bankers shape and make, and not only ‘mirror’, market forces.

Keywords

Climate changecentral banksmarket neutralitydiscourse
Type
Article
Information
Finance and Society , Volume 9 , Issue 1 , 2023 , pp. 14 - 34
Creative Commons
Creative Common License - CCCreative Common License - BYCreative Common License - NCCreative Common License - ND
This is an Open Access article, distributed under the terms of the Creative Commons Attribution-NonCommercial-No Derivatives licence (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits noncommercial re-use, distribution, and reproduction in any medium, provided the original work is unaltered and is properly cited. The written permission of Cambridge University Press must be obtained for commercial re-use or in order to create a derivative work.
Copyright
© 2023 The Author(s)

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