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Rising inflation complicates the alignment of the ECB’s policies with the Paris Agreement. This paper provides novel evidence for inflationary pressures arising from natural disasters. We then discuss the effectiveness of monetary instruments to boost a green transition, concluding that the scope of policy measures used thus far is limited. As additional measures, we advise active rebalancing of the ECB’s bond holdings towards greener issuers, enforcing stricter disclosure standards, and differentiating ...

Afin de soutenir les projets en matière de climat et d’environnement, la Commission européenne a proposé, en juillet 2021, un règlement relatif à une norme européenne en matière d’obligations vertes. Ce texte vise à créer une norme officielle de l’Union pour les obligations vertes qui soit alignée sur la taxinomie de l’Union, avec la mise en place d’un système d’enregistrement et d’un cadre de surveillance pour les examinateurs externes. Un accord politique provisoire conclu entre le Parlement et ...

The ECB is now planning to run down its vast bond holdings acquired under the asset purchase programme ----- a ‘‘quantitative tightening’’. However, the ECB is not contemplating selling any bonds, only not reinvesting part of what is coming due. Under this approach, the continuing expansionary effect of keeping vast holdings remains large and is likely to complicate the fight against inflation. The ECB currently has two, fungible, policy instruments (policy rates and balance sheet operations), which ...

Confronted with a historic inflation surge, the ECB steps on the brake(s). While interest rate hikes are its primary tool, unconventional tools are also adjusted to strengthen the brake intensity. Quantitative tightening will reduce the stock of bonds in a slow process. The change from a scarce to an abundant reserve system will prevail. In contrast to previous monetary tightening cycles, in an abundant reserve system huge interest expenses result in central bank losses and fiscal costs for the coming ...

The Eurosystem is now reducing its bond holdings. Provided this is carried out in a measured way, it should not have a big impact on financial conditions or cause financial instability. The reduction is the correct policy because of legal problems with the Eurosystem owning so many sovereign bonds and because it provides space to implement the Transmission Protection Instrument (TPI) effectively. On the costs of operating a large balance sheet, the ECB should re-introduce its tiering system for compensation ...

While greater inflation may have led to some positive “first-round” effects for banks, several negative “second-round” impacts may occur, including: i) an increase in credit risk, affecting both families and companies, especially “heavy energy users”; ii) a drop in the value of fixed-rate assets held by lenders, including sovereign bonds; iii) liquidity pressures due to the ECB’s recent decision to increase the cost of its outstanding 3-year facilities and to greater competition for retail deposits ...

This briefing presents in a tabular manner the EU issuance of bonds and bills to finance the Next Generation EU, notably the Recovery and Resilience Facility.

This paper was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 26 September 2022.

Le marché des obligations vertes, en plein essor dans l’Union européenne, n’a pas encore été harmonisé. Il n’existe pour le moment que des normes privées. En juillet 2021, la Commission a présenté une proposition de règlement sur les obligations vertes européennes . Celle-ci fait partie intégrante d’une orientation législative plus large de l’Union sur la finance durable, qui a engendré l’adoption du règlement sur la taxinomie et du règlement sur la publication d’informations en matière de durabilité ...

Green bonds are committed to financing or re-financing investments, projects, expenditure or assets helping to address climate and environmental issues. Both governments and companies use them to finance the transition to a more sustainable and low-carbon economy. Since the EIB inaugurated the green bond market in 2007 with its Climate Awareness Bond, the market has grown very fast, but it still represents only about 3 to 3.5 % of overall bond issuance. The green bond market needs to grow more quickly ...