IMF Working Papers describe research in progress by the author(s) and are published to elicit
comments and to encourage debate. The views expressed in IMF Working Papers are those of the
author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
IMF Working Papers describe research in progress by the author(s) and are published to elicit
comments and to encourage debate. The views expressed in IMF Working Papers are those of the
author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Climate change is one of the greatest challenges of this century. Mitigation requires a large-scale
transition to a low-carbon economy. This paper provides an overview of the rapidly
growing literature on the role of macroeconomic and financial policy tools in enabling this
transition. The literature provides a menu of policy tools for mitigation. A key conclusion is
that fiscal tools are first in line and central, but can and may need to be complemented by
financial and monetary policy instruments. Some tools and policies raise unanswered
questions about policy tool assignment and mandates, which we describe. The literature is scarce, however, on the most effective policy mix and the role of mitigation tools and goals
in the overall policy framework.