This opinion piece in Foreign Affairs points out how much of the stimulus created by world governments has gone to carbon-intensive industries and the fossil fuel sector that needs to be wound down in order to stave off the worst impacts of the climate crisis.
In Europe, as in the United States—where central banks and financial regulators have not meaningfully incorporated climate change into their decision-making—bailout money is finding its way to struggling, debt-laden, and increasingly unprofitable fossil fuel companies. Not only is enabling fossil fuel investments bad public policy, it makes little economic sense. The world’s leading central banks must quickly reverse course and limit investments in the fossil fuel industry in order to avoid further increasing the systemic risk that climate change poses to the financial system.
Ultimately, regulators can decide which direction they want to push their economies. The current course for many central banks that are all too aware of the threat climate change poses to their financial systems is to nonetheless send billions of taxpayer dollars to fossil fuel companies. If they do not reverse course, the debts of these companies will sit on public and private balance sheets as ticking time bombs, epitomizing the very risk that central banks have warned against for years.