15 February: To quantify the impact of “green” monetary and supervisory policies of central banks we develop a dynamic General Equilibrium Model for Sustainable Transitions (GEMST-1). This enables us to make a distinction between green and dirty final subsectors and fossil and renewable power sectors and take into account the feedback loops across sectors through energy prices until 2050. We identify four instruments (capital requirements, collateral frameworks, Asset Purchase Programmes, and Refinancing Operations) of central banks that can lower the cost of capital for climate-friendly investments and thus accelerate the energy transition and lower climate risks. We run three scenarios of different green central bank policies where the cost of capital of green final sub-sectors and/or renewable power sectors is lowered by an ambitious 100 basis points. Our analyses show that the maximum impact of such policies is achieved when it is implemented on both green final sub-sectors and renewable sub-sectors at the same time. Moreover, our study finds that green central bank policies can substantially accelerate the transition with a climate contribution that amounts to 5% -12% of the needed emission reductions under an ambitious climate action scenario. Whereas this is a substantial figure, it also indicates that green central bank policy should be seen as a compliment, not a substitute for fiscal and regulatory reports.