Climate Policy and Macrofinancial Institutions

Benjamin Braun

If the task of decarbonizing the global economy presents a formidable coordination challenge, the recent return of industrial policy marks a shift towards greater state involvement in the planning of the green transition. However, this shift occurs against the backdrop, and within the constraints, of a macrofinancial regime – a combination of fiscal, monetary, and financial institutions – designed to limit state involvement in capital allocation and to leave the creation and allocation of credit to private financial actors. What is more, the last time states engaged in industrial policy on a large scale, they did so under the Bretton Woods system of embedded liberalism – a world apart from today’s globalized financial system. Macrofinancial governance is therefore likely to become a bottleneck for green industrial policy. Using both historical and contemporary case studies, this project examines varieties of macrofinancial regimes for their fit with different green industrial policy strategies.