Many of the measures governments can take to address climate change fall under the headings of taxing and spending—in other words, fiscal policy. But fiscal policy is often steered by politics, which can lead to slow progress on a polarizing issue such as climate change. Some politicians and voters have begun to look to central banks to help make climate-oriented policies, but Chicago Booth’s Lars Peter Hansen warns that monetary policy is far more limited in its capacity for environmental goals.

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