FRANKFURT: European Central Bank lending programs disproportionately favor polluters, argued the New Economics Foundation think tank on Tuesday (March 9), calling for new rules that benefit “green” businesses and punish energy-hungry companies.
With 1.8 trillion euros (US $ 2.1 trillion) in outstanding loans to banks, the ECB has become the largest source of funding for the euro area economy and its plan to continue to grow. its track record indicates an oversized role for years to come.
But the ECB tends to demand less collateral on carbon-intensive corporate assets, implicitly encouraging fossil fuel companies to tap bond markets, the think tank argued.
“The guarantee framework is not only at odds with the democratically defined goals of the Paris Agreement and the EU’s Green Deal, but it also actively supports failures in financial markets and strengthens the carbon lock-in,” said the group in a report.
Alternatives to the current framework include stricter pricing of guarantees for polluting companies to the exclusion of the assets of energy-intensive and fossil-fuel-intensive companies, the report argued.
The ECB, which is conducting a broad policy review, has recognized that markets are not pricing carbon-intensive assets properly and has vowed to play a bigger role in tackling climate change.
But policymakers disagree on the specific steps he should take and the options include a wide range of proposals ranging from forcing banks to make more climate-related disclosures to deflect asset purchases from polluters. .
“The principle of market neutrality is increasingly challenged on the grounds that it can reinforce market failures that slow down society’s transition to a carbon neutral economy,” Board member Isabel Schnabel said last week. administration of the ECB. “It is questionable whether the market is the appropriate benchmark.”