Indirect responsiveness and green central banking

ABSTRACT

Since 2019, the European Central Bank has become the global frontrunner in green central banking, while the US Federal Reserve has remained a climate laggard. Based on 15 interviews and primary sources, we argue that this policy divergence demonstrates central bankers’ indirect responsiveness to political developments. We showcase how political events – the Global Financial Crisis, the Paris Climate Agreement, the EU’s Green Deal, and the Trump and Biden elections – spurred central bankers to either adopt a greener interpretation of their mandates or invoke their mandates to justify inaction. In the EU, adopting a greener stance became a component of central bankers’ strategy to build broad support. In the US, avoiding the climate issue was necessary to stay above the political fray. Overall, the European green turn challenges the conventional view of the ECB as the archetypical responsible but unresponsive institution.

KEYWORDS:

• Central banking
• climate change
• European Central Bank
• green central banking

Acknowledgements

For their constructive feedback, the authors are grateful to Amandine Crespy, Vivien Schmidt, Tiago Moreira Ramalho, and other participants of the special issue project workshops, as well as to Dermot Hodson, Tobias Tesche, Jens van ‘t Klooster, and three anonymous reviewers for this journal. We also thank the European and American officials who granted us confidential interviews.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Norges Forskningsråd: [grant number 324468].

Notes on contributors

Nicolas Jabko

Nicolas Jabko is an Associate Professor at Johns Hopkins University, Department of Political Science.

Nils Kupzok

Nils Kupzok is a Postdoctoral Fellow at Johns Hopkins University School of Advanced International Studies.