How the ECB legitimises its green monetary policy
In their blog post for the London School of Economics, Joscha Wullweber and Nicolás Aguila shed light on how the ECB's narrative on green monetary policy has shifted over time.
The climate and environmental crisis is putting the European Central Bank (ECB) under increasing pressure to take effective monetary policy measures. In their blog post for the London School of Economics, Joscha Wullweber and Nicolás Aguila shed light on how the ECB's narratives on green monetary policy have shifted over time.
The authors analysed 126 speeches by members of the ECB's Executive Board between 2018 and 2022 to understand how the central bank places climate issues within its remit. They identified three main narratives:
1) The climate crisis as a financial risk that can lead to market instability
2) The gap in investment in green projects that cannot be covered by existing financing mechanisms
3) The impact of the climate crisis on price stability.
While the financial risks of the climate crisis initially took centre stage, the focus has now shifted to the impact on price stability. The investment gap in green projects remained a constant topic, but was never at the centre of discussions, according to the authors.
What monetary policy innovations are needed to tackle the growing challenges of the climate crisis? What is needed for an effective and comprehensive green monetary policy?