Why and how should the central bank contribute to combating climate change?
New publication by Nicolás Aguila and Joscha Wullweber [tra:ce]: Market liberalism, stratified central banking and the ECB's ongoing discursive shift from environmental risks to price stability
By analysing the speeches of ECB Executive Board members, we have identified three main narratives about the consequences of the environmental crisis in the monetary authority's sphere of influence: The first emphasises environmental phenomena as financial risks; the second highlights the green investment or financing gap; the third focuses on the impact of climate change on price stability.
These narratives lead to different forms of legitimisation in terms of why and how the central bank should intervene to combat climate change. We show that the third narrative replaces the first as the dominant discourse on the ECB's climate policy. Shifting the focus from the central bank's financial stability obligations to its responsibility for price stability under the main mandate could lead to a far-reaching green monetary policy. However, based on the concept of multi-layered structures, we argue that this change does not mean a shift away from market-liberal central banking, but rather a shift within the existing system. What we are witnessing is a new form of market liberalism adapted to climate change, or market liberalism in climate crisis mode.