The ECB’s New Green Monetary Policy

The global climate crisis as one of the greatest challenges of our time (actually or potentially) affects all policy areas. This includes monetary policy, not least because climate change impacts the ability of central banks to achieve their mandate. Under its new monetary policy strategy, the European Central Bank (ECB) has thus vowed to take comprehensive account of climate factors and to gradually adjust the monetary policy framework accordingly. This chapter analyses (legal) constraints and limits, as well as opportunities and potential further steps of a green monetary policy, including the incorporation of other environmental and sustainability factors, such as biodiversity. To this end, the premises, objectives and content of the ECB’s new green monetary policy are analysed. This analysis sets the scene for a thorough assessment of limits and opportunities of green monetary policy in the Eurozone. After analysing the legal framework the ECB operates in—namely its mandate as defined by EU primary law, the limits for the use of competences by the ECB contained therein, as well as requirements pointing in the opposite direction of obligations to pursue green monetary policy—the chapter goes on to scrutinize concrete measures and instruments as to their compatibility with said framework. Finally, the results obtained are placed in a broader context by asking what we consider appropriate aspirations for the future role of the ECB in the fight against climate change.