Today, in coordination with European civil society organisations and academics, we sent an open letter to French President Emmanuel Macron, following his support to incentivise lending for the green transition by differentiating interest rates on loans for environmentally harmful activities and green activities, as evidenced in his recent speech at COP28.
For years, we have championed the cause of dual rates as a powerful tool to steer financial flows away from harmful activities, such as fossil fuel projects, and towards crucial green transition sectors like renewable energy and energy-efficient home renovations. Our call has now been echoed by six esteemed academics and 17 other NGOs, urging France to seize this moment and lead the discussion on implementing this policy on a EU and global scale.
Despite the European Central Bank’s (ECB) recognition of the urgency of a swift green transition, high interest rate hikes are inadvertently increasing the financing costs of renewable energy projects and energy-efficient renovations. This not only hinders the EU’s climate objectives, but also increases its exposure to inflation triggered by fossil fuel prices and climate change. For this reason, advocating for the adoption of dual rates, which would offer a more balanced approach to managing inflation, is more crucial than ever.
At the same time, it is important to remind President Macron and all policy-makers of two key prerequisites for the implementation of dual rates. Firstly, we need democratic legitimacy and accountability, which entails a strong control of the European Parliament over the ECB and a clear alignment with EU environmental goals. Secondly, we must ensure sufficient data and supervision to avoid greenwashing and direct lending towards truly green activities.
If France were to effectively advocate for the adoption of dual rates at the EU level, public financial institutions, including the ECB itself, would no longer have an excuse not to adopt it. Will President Macron take on this crucial role?