Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies

Abstract

The ECB’s mandate regarding climate change is being actively debated. According to some, the ECB’s mandate excludes any climate-related role, while others argue for a broad responsibility of the ECB in this context. This article argues for a middle way: under certain conditions, the ECB should take climate change into account and act accordingly while pursuing its objectives. EU law and the overall constitutional structure of the Union also provide limits as to how much the ECB can do in this field. This article focuses on the interpretation of the secondary objective of the ECB, according to which the ECB shall support the general economic policies in the Union with a view to contributing to the achievement of the Union’s objectives. This argues that this objective might lend support to ECB measures with an environmental dimension, but it only establishes a contributory power: the ECB cannot make its own environmental policies. ECB, central banking, mandate, monetary policy, climate change, institutional balance

The accountability of the European Central Bank: New frontiers, new challenges

“…In addition, according to Article 11 TFEU, environmental protection requirements must be integrated into the definition and implementation of the Union's (therefore also the ECB's) policies and activities, in particular with a view to promoting sustainable development; and Article 37 of the EU Charter of Fundamental Rights, which also binds the ECB as an EU institution (Article 51(1) EU Charter), requires that a high level of environmental protection and the improvement of the quality of the environment be integrated into the policies of the Union and ensured in accordance with the principle of sustainable development. 29 Furthermore, it will be recalled that, according to Article 7 TFEU (the so-called 'consistency clause'), the Union shall ensure consistency between its policies and activities, taking all of its objectives into account and in accordance with the principle of conferral of powers. Seen in this light, it is not only logical but also legally required that the ECB 'ensure its policies and activities are congruent with those of the EU at large' with respect to climate change.…”

Accountability of greening the ECB

“…17 Dogmatically, Article 3 TEU and its objectives assume as a precondition that competences have been transferred to the Union. 18 Article 3(6) TEU clearly states: 'The Union shall pursue its objectives by appropriate means commensurate with the competences which are conferred upon it in the Treaties.' 19 Article 7-17 TFEU contain so-called cross-sectoral clauses, which have to be taken into account when implementing any EU policies.…”

The Federal Reserve balance sheet

“…Thus, the Fed's mandate does not include addressing climate change or other possible objectives. 36 Second, it is not clear that the Fed's tools would be all that helpful in achieving these objectives. Except in unusual and exigent circumstances, the Fed cannot purchase corporate securities of any sort, so it would need to be given authority to purchase securities or provide loans financing green investments, perhaps at concessional rates.…”