Greening Monetary Policy
Climate Policy , Volume forthcoming
While there is increasing interest in decarbonising or greening monetary policy, central banks are keen to maintain market neutrality. However, there is evidence that the market has a bias towards carbon-intensive companies. The paper develops a method to tilt the European Central Bank’s (ECB) asset and collateral framework towards low-carbon assets. We find that a medium tilting approach reduces carbon emissions in the ECB’s corporate and bank bond portfolio by over 50%. We show that a low carbon allocation can be done without undue interference with the transmission mechanism of monetary policy.
|Monetary Policy, Collateral, Decarbonising, Carbon Emissions, Cost of Capital|
|Organisation||Rotterdam School of Management (RSM), Erasmus University|
Schoenmaker, D. (2020). Greening Monetary Policy. Climate Policy, forthcoming. Retrieved from http://hdl.handle.net/1765/132557