This policy research, co-authored by the Veblen Institute for Economic Reforms and Positive Money Europe, examines the structural misalignment between the European Central Bank’s (ECB) Corporate Sector Purchase Programme (CSPP) and the European Union’s broader climate policy objectives. Through a granular analysis of the CSPP portfolio, the study finds that 63% of acquired assets belong to high-carbon sectors—including fossil fuel extraction, automotive manufacturing, and energy-intensive utilities—reflecting an uncritical adherence to the “market neutrality” principle. This approach effectively subsidizes carbon-intensive industries by maintaining low capital costs and favorable debt issuance conditions for polluting firms.
The authors argue that the ECB’s current strategy ignores “transition risks” and fails to fulfill procedural obligations under Article 11 TFEU, which requires all EU institutions to integrate environmental protection into their policies. To rectify this, the report proposes a radical shift from neutrality to a sustainability-based framework.
Key recommendations include:
- Revising the Collateral Eligibility Framework to include environmental impact “haircuts,” effectively raising refinancing costs for carbon-intensive assets.The report urges the ECB to abandon “market neutral” for a climate-aligned strategy. By mandating carbon disclosure and integrating environmental risks into refinancing, the ECB can use its financial power to back EU 2030 climate goals, not subsidize fossil fuels.
- Implementing mandatory carbon footprint disclosure as an eligibility criterion for CSPP reinvestments by 2020.
- Phasing out bonds from the fossil fuel sector while increasing the share of green bonds and sustainable transport securities (e.g., rail).
This policy note suggests a way to integrate carbon emissions as a criterion in its own right, shaping central banks’ investment decisions and the collateral framework used for refinancing purposes. As the ECB intends to maintain its balance sheet volume at its current level even after the Quantitative Easing officially ends, the most urgent decisions concern the reinvestment of revenues from programs such as the CSPP. Technical difficulties related to estimating carbon emissions for different financial assets are real but surmountable and should not justify inaction.
Recommended citation:
Jourdan, S. and Kalinowski, W. (2019) Aligning Monetary Policy with the EU’s Climate Targets. Positive Money Europe, Veblen Institute. Available at: https://www.positivemoney.eu/wp-content/uploads/2019/04/Aligning-Monetary-Policy-with-EU%E2%80%99s-Climate-Targets.pdf.