Despite its decision to start raising interest rates, the European Central Bank President Christine Lagarde signalled an interest in introducing a “green TLTRO” system – a reference to Positive Money Europe’s proposal which is now making a comeback in the debate.

Last week the European Central Bank (ECB) announced a well-expected increase of the key interest rate in July and September and said it will stop buying more bonds under its asset purchase programme (“quantitative easing”). 

Like many observers, Positive Money Europe doubts that raising rates will anyhow help reduce prices, given that the current price increase is dominantly stemming from energy prices, on which the ECB has not much influence (except perhaps through the exchange rate, as stronger euro vs. the dollar would reduce the cost of imported energy).

Thus, we were relieved to hear the ECB President reaffirming her willingness to explore alternatives. During the press conference, Lagarde emphasised her openness to consider introducing a lower interest rate for green investments in the future, under a scheme that has often been called “Green TLTROs” or “green lending facility”.

“Some of us are also interested in looking at how we can support the financing of the measures needed against climate change.” Lagarde said, “I’ve said already before that a green LTRO was interesting to consider. I think the reinvestment decisions that we will make in the coming months and years might also be inspired by this concern that we have.”


Under this proposal, which has been championed by Positive Money Europe for the past 2 years, the ECB would provide a lower interest rate to banks under the condition that the latter prove they are increasing their lending towards green investments, such as energy efficiency renovation projects of buildings.

Lagarde already expressed her interest in the idea in September 2020 when asked by a Member of the European Parliament on Positive Money Europe’s report. However, the proposal was disappointingly not included in the ECB’s action plan on climate change which was released in July 2021, leaving the impression that the proposal had been ditched in the process.

Not giving up

But thanks to Positive Money Europe’s tireless efforts, the proposal is now making a comeback on the ECB’s table.

Last week we released an open letter signed by high-level experts and economists, underlining the merits of the proposal. Shortly after receiving the letter, Christine Lagarde made an allusion to the proposal during a panel debate where she indicated that she was “not giving up” on green targeted lending. “Japan is doing it. China is doing it. Why wouldn’t we have an open mind about it?” she asked. “I know it’s not squarely in the mandate and it is not necessarily in what we consider as the prime objective but, you know, if we don’t try then we have no chance of succeeding,” she added, “So count on me.

We already knew that Lagarde was interested in the idea, but by mentioning it again at last week’s press conference, she went one step further. She made sure a room full of journalists would take notice of that, and said explicitly that several members of the Governing Council also think the proposal merits consideration, so she is not a lonely voice anymore.

Update July 8th 2022: The European Central Bank responded further to us in a letter to Positive Money Europe and the authors of the above mentioned open letter. In the letter, Christine Lagarde says: “in your open letter, you specifically make the case for the introduction o a « green dual rate » to encourage banks to fund clean energy production, or an energy efficiency renovations. The feasibility of refinancing operations with a green target, or an entry efficiency target, crucially hinges on the availability of a proper definition of these criteria and the ability to measure them reliably. While ongoing regulatory developments can be expected to improve data availability over time, significant challenges persist in relation to data coverage and quality, as well as verification processes and capacities.”

Positive Money Europe will continue to work hard to provide evidence that offering a lower interest rate for the activities that are most critical to succeed in the green transition is a win-win solution for the low-carbon transition of our economy, for jobs, and for the ECB’s pursuit of price stability.

Photo “The ECB held its Governing Council Press Conference on 9 June 2022 in Amsterdam, The Netherlands” by Dirk Claus/ECB, Creative Commons License, cropped


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