Financing climate investment in the EU: The role of monetary and financial policies

Abstract

The climate crisis requires an unprecedented transformation of the EU fiscal, industrial, trade, and regulatory policy frameworks. However, this transformation needs to be supported by the greening of the EU monetary and financial policies. This would facilitate the financing of the large amount of investment in climate mitigation and adaptation that is needed in the coming years. In this chapter, we present a set of tools that central banks, financial regulators, and financial supervisors can employ to advance the EU decarbonisation and climate resilience targets. We highlight that these tools should be used in a context of a concrete 'sticks and carrots' policy mix framework that moves beyond market-based approaches.