Paris 2015 marks the start of a climate change investment boom worth trillions of dollars. This upcoming hype begs the question: can we grow our way out of climate change?

In theory, uncertainties about the costs of the low carbon policies implemented by each country to meet the emissions quota imposed by the agreement make it unlikely that any credible agreement could be reached or respected, either because countries would be reluctant to commit, or due to opportunistic cheating.

A factor that clearly differentiates COP21 and COP15 in Copenhagen is the increasing mobilization of the financial sector. In the past months, financial actors have taken commitments and spoken out on climate-related topics.

Because the climate is a common good, economists generally advocate the use of an international carbon price to internalize climate risk, to incorporate as many countries as possible into an agreement and to thwart “free-rider” strategies.

It will be key for the global sustainability transition that the measures taken in the respective sustainability dimensions, i.e. the economic, the ecological, and the social dimension, complement and reinforce each other.

Linking public debt to CO2 emissions could give governments a strong incentive to deliver on climate change action.

This year, Europe is confronted with a critical double challenge: addressing the climate change issue and pulling itself out of a persistent low growth trap. Today these two challenges are addressed separately. We propose to make private low-carbon assets eligible for the ECB asset purchase program.

Massive financing of the energy transition in schools, hospitals
and other public buildings.

How central banks can contribute to staying below the 2°C benchmark by purchasing Green Climate Bonds.

Novel ideas how to spend climate finance in a way that reduces emissions and at the same time promotes recipients’ immediate development objectives are required. In this short commentary, we propose to regard climate finance in the broader context of sustainable development.