What can central banks do to address climate risks?

If done carefully:

In democratic societies, decisions on allocating resources and redistributing incomes are taken by elected bodies. Obviously, policies relating to climate change belong to that category. Independent central banks are non-elected ‘agents’ of the society; they have a well-specified mandate to stabilise the economy. It can be argued that central banks would be going beyond their mandate if they were to tweak their instruments of monetary policy to allocate resources and direct credit. This seems to be the position taken by the Federal Reserve. Chairman Powell stated recently that “[c]limate change is an important issue but not principally for the Fed”.

The trade-off is real and difficult. If the central bank were to assess the situation itself and contemplate actions, its legitimacy would be challenged. In addition, it would expose itself to various political pressures. One other hand, if it requests some formal guidance by elected bodies (e.g. the parliament), it risks fuelling the perception that it has lost its independence. There might be subtle ways and procedures to navigate between those risks, but the dangers are real and would justify a great caution. Under all circumstances, the central bank should keep the absolute discretion to interrupt any action or programme if its first-priority objective – price stability – were to be compromised.

Brunnermeier and Landau, The Centre for Economic Policy Research, VoxEU.org – CEPR’s policy portal, 15 January, 2020, (footnotes omitted): https://voxeu.org/article/central-banks-and-climate-change .

Nothing. They cant even deliver on their core mandate. This is just a distraction

Nothing. They cant even deliver on their core mandate. This is just a distraction

Look at the history of the US before the Great Depression when the US was officially on a gold standard (in name only, effectively there was never really a meaningful gold standard) and the Fed such as it was back then did nothing to regulate the money supply. Every twenty years or so there was a depression followed by a deflation where land and commodity values crashed. The depressions were almost like clockwork they happened so regularly. Farmers in particular suffered as the value of their land and crops declined in unison making it impossible to borrow. Farmers going bankrupt was common. While the US and the rest of the world has had recessions they have not been as frequent nor as severe as they were in what many somehow view as the good old days. And, obtw, being on a gold standard did absolutely nothing to promote economic growth or deter periodic depressions.

"There is no point in a central bank moving on its own in a country where the government does nothing, and vice versa."

Japan is a case in point where the inflation rate has not changed over many many years.

Japan is a case in point where the inflation rate has not changed over many many years.

Please do not confuse a government knowingly doing nothing when it is a situation where government can do little to change the situation. Until this pandemic threw the global economy into disarray deflationary pressures were apparent across the developed world. Japan and many other nations actually did much to prevent their nations from descending into deflationary death spirals where incomes, wages and prices decline in unison, all except outstanding loan balances. Those do not decline during a deflation and when incomes are no longer sufficient to make payments on outstanding loans and this happens across an economy, there is mass bankruptcy, mass unemployment and misery rivaled only by war. Japan, the US and other nations have worked very hard to prevent this from happening even as the deflationary pressures were great and have been since about 2008.