FROM THE BLOG
In 2021, the ECB embraced a major shift in thinking by adopting a roadmap on climate change. However, given the urgency of the environmental breakdown and the current energy costs crisis, progress remains too slow. Together with 16 partner NGOs, we offer the ECB recommendations on how to best implement the ECB’s climate strategy.
New Research: “The role of central banks’ credit rating in mitigating climate and environmental risk”
New research by Positive Money Europe and WWF proposes expanding the role of Eurosystem’s own internal credit assessment systems, the so-called ICASs, to integrate climate and environmental risks. We see the increasing role and potential of C&E risk integration into ICASs as a concrete, workable and impactful way to green the collateral framework.
In a vote on Tuesday 15th February, Members of the European Parliament (MEPs) told the European Central Bank to step up its commitment to fight climate change beyond its action plan adopted in July 2021.
The ECB is currently working on introducing a digital currency – to exist alongside banknotes – that citizens and firms can use for everyday payments. A digital euro would be safer than bank deposits and inherently more stable than crypto assets such as Bitcoin. However, many are worrying: How will the ECB make sure that the digital euro respects users’ privacy?
The combination of higher inflation and the still too slow green transition creates a dilemma for the European Central Bank because taming down inflation using its traditional interest rate policy would effectively make green energy investments costlier. To avoid such counter-productive outcomes, the ECB needs to signal clearly that any effort to fight inflation will also maintain favorable funding conditions for spending or investments that contribute to a successful energy transition.
Amidst soaring inflation, central bankers should avoid panicking prematurely and compare the current situation to that of stagflation as seen in the 1960s and 1970s. Even persistent inflation has causes other than monetary policy, Economist and historian Eric Monnet reminds us.
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