FRANKFURT (Reuters) – European Central Bank lending programs disproportionately favor polluters, the New Economics Foundation think tank argued on Tuesday, calling for new rules that benefit “green” businesses and punish companies to high energy intensity.
With 1.8 trillion euros ($ 2.1 trillion) in outstanding loans to banks, the ECB has become the main source of funding for the euro area economy and its plan to continue growing its balance sheet. indicates an oversized role for years to come.
But the ECB tends to demand less collateral on the assets of carbon-intensive companies, 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 block,” said the group in a report.
Alternatives to the current framework include stricter pricing of guarantees for polluting companies to exclude the assets of companies using fossil fuels and intensive energy, according to the report.
The ECB, which is leading a broad policy review, has recognized that markets are not pricing carbon-intensive assets properly and has pledged to play a bigger role in tackling climate change.
But policymakers disagree on what specific steps to take, and options include a wide range of proposals ranging from forcing banks to make greater 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,” Isabel Schnabel, member of the ECB board of directors. “It is questionable whether the market is the appropriate benchmark.”
(1 USD = 0.8400 euros)
Report by Balazs Koranyi. Editing by Mark Potter