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2024 | OriginalPaper | Chapter

11. The ECB’s New Green Monetary Policy

Author : Claudia Wutscher

Published in: Sustainable Finance in Europe

Publisher: Springer International Publishing

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Abstract

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.

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previous chapter The Role of Prudential Regulation and Supervision of Insurers in Sustainable Finance

next chapter Sustainable Finance: An Overview of ESG in the Financial Markets

Cf. the remarks by United Nations Secretary-General António Guterres at the Climate Ambition Summit in December 2020, where he urges all leaders worldwide to declare a climate emergency. From the growing number of such declarations worldwide, cf. for example the European Parliament resolution of 28 November 2019 on the climate and environment emergency, 2019/2930(RSP).

IPPC. (2022). Press release of 4 April, 2022/15/PR.

Cf. e.g. Breckenfelder, Johannes et al. (2023). “The climate and the economy”. ECB Working Paper Series, No 2793, March.

UN Treaty Series, vol. 3156, C.N.92.2016.TREATIES-XXVII.7.d. The Paris Agreement was adopted on 12 December 2015 at the twenty-first session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 21).

Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, pp. 796, 798.

See below Sect. 11.2.1. Cf. also Chapter 8 on Climate Change as a Systemic Risk in Finance.

Article 2(1)(c) Paris Agreement.

E.g. Singh-Ghaleigh, Navraj. (2021). “Article 2. Aims, objectives and principles”. In: Van Calster, Geert & Reins, Leonie (eds.), The Paris Agreement on Climate Change. A Commentary, para 2.22. Cf., on the ECB in particular, Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, p. 381.

Cf. Chapters 9 and 10 on the role for the prudential supervision of banks and of insurance companies in sustainable finance.

Article 282(1) second sentence TFEU (Treaty on the Functioning of the European Union, OJ C 326, 26.10.2012, p. 47).

In the sovereign debt crisis, Mario Draghi’s famous “whatever it takes” speech and the “unconventional” (in particular: quantitative easing) measures taken by the ECB in its wake had played a pivotal role in the very survival of the euro as a common currency; cf. e.g. Bobic, Ana & Dawson, Mark. (2019). “Quantitative easing at the court of justice—Doing whatever it takes to save the euro: Weiss and others”. Common Market Law Review, 56, p. 1005. The CJEU considered these unconventional measures to be compatible with European Union law; see Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000. However, in the wake of the CJEU’s decision in the Weiss case, the German Federal Constitutional Court (FCC) activated its ultra vires reservation for the first time; see BVerfG, Judgment of the Second Senate of 5 May 2020—2 BvR 859/15 and, thereto, from the extensive literature, e.g. Bobic, Ana & Dawson, Mark. (2020). “Making sense of the ‘incomprehensible’: The PSPP judgment of the German Federal Constitutional Court”. Common Market Law Review, 57, p. 1953.

Cf. e.g. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1351.

Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 396.

ECB. (2021). The ECB’s monetary policy strategy statement. Cf. ECB Press release. (8 July 2021). ECB’s Governing Council approves its new monetary policy strategy.

ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy. As an annex to this press release, a “Detailed roadmap of climate change-related actions” was published.

See ECB Press Release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations; the adjustment of the corporate sector purchase programme (CSPP) was effected by Decision (EU) 2022/1613 of the European Central Bank of 9 September 2022 amending Decision (EU) 2016/948 on the implementation of the corporate sector purchase programme (ECB/2016/16), ECB/2022/29, OJ L 241, 19.9.2022, p. 13; thereto, see below Sect. 11.4.4.

ECB. (2022). ECB climate agenda 2022.

See ECB Press Release. (25 January 2021).

The NGFS was established at the first One Planet Summit in December 2017 by central banks and financial market regulators. Cf., on the NGFS and the Eurosystem’s role therein, Tokarski, Paweł. (2021). “EZB, Klimawandel und Finanzstabilität”. SWP-Studie, 20, November, pp. 12 et seq.

E.g. van Tilburg, Rens & Simić, Aleksandar. (2021). “Legally Green. Climate change and the ECB mandate”. Sustainable Finance Lab Policy Paper, July.

Cf. e.g. Mauderer, Sabine. (2023). “Climate change, biodiversity loss and the role of central banks”. Deutsche Bundesbank Spring Conference 2023—Climate Change and Central Banks, 11 May; Elderson, Frank. (2023). “The economy and banks need nature to survive”. The ECB Blog, 8 June.

E.g. Cochrane, John H. (2020). “Challenges for central banks”. Comments at the ECB Conference on Monetary Policy: Bridging Science and Practice, 20 October.

Article 13(2) TEU (Treaty on European Union, OJ C 326, 26.10.2012, p. 13).

The annual inflation rate in the euro area was 10.6% in October 2022 and 11.5% in the EU as a whole, in August 2023 it was down to 5.2% in the euro area and 5.9% in the EU; see Eurostat Euro indicators 130/2022 of 17 November 2022, and Eurostat Euro indicators 105/2023 of 19 September 2023.

OJ C 326, 26.10.2012, p. 391.

Carney, Mark. (2015). “Breaking the tragedy of the horizon—Climate change and financial stability”. Speech at Lloyd’s of London, 29 September.

Granoff, Ilmi. (2023). “The tragedy on the financial horizon is closer than you think”. Climate Law. A Sabin Center Blog. 4 May.

Cf. Recital 25 of Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999, OJ L 243, 9.7.2021, p. 1 (‘European Climate Law’).

This arguably applies mutatis mutandis to other environmental factors.

ECB. (2021). The ECB’s monetary policy strategy statement.

E.g. NGFS. (2019). “A call for action: Climate change as a source of financial risk”. First Comprehensive Report, April, p.12; some treat liability risks as a separate channel. This chapter, however, follows the NGFS’s approach to treat liability risks as a subset of physical and transition risks.

ECB. (2021). “Climate change and monetary policy in the euro area”. Occasional Paper Series, No 271, p. 20. Cf. also the definition proposed by the European Banking Authority (EBA): EBA. (2021). Report on Management and Supervision of ESG Risks for Credit Institutions and Investment Firms. EBA/REP/2021/18, p. 38: “physical risks are the risks of any negative financial impact on the institution stemming from the current or prospective impacts of the physical effects of environmental factors on its counterparties or invested assets”.

Cf. NGFS. (2019). “A call for action: Climate change as a source of financial risk”. First Comprehensive Report, April, p. 26. Cf. also the definition proposed by the European Banking Authority (EBA): EBA. (2021). Report on Management and Supervision of ESG Risks for Credit Institutions and Investment Firms. EBA/REP/2021/18, p. 41: “Transition risks are the risks of any negative financial impact on the institution stemming from the current or prospective impacts of the transition to an environmentally sustainable economy on its counterparties or invested assets”. According to some definitions, liability risks are referred to as a separate category.

Cf., in particular, the six reference scenarios of the NGFS as proposed in NGFS. (2020). NGFS climate scenarios for Central Banks and supervisors, currently available in its third vintage, NGFS. (2022). NGFS climate scenarios for Central Banks and supervisors.

On climate stress testing cf. e.g. UN Environment Programme Finance Initiative. (2021) Comprehensive good practice guide to climate stress testing.

Cf., again, NGFS. (2022). NGFS climate scenarios for Central Banks and supervisors; Bolton, Patrick et al. (2020). The Green Swan—Central Banking and Financial Stability in the Age of Climate Change, p. 19.

Bolton, Patrick et al. (2020). The Green Swan—Central Banking and Financial Stability in the Age of Climate Change. This concept draws on the “Black Swan” concept developed by Nassim Nicholas Taleb.

Cf. Chapter 8 on Climate Change as a Systemic Risk in Finance.

Cf. Chapter 8 on Climate Change as a Systemic Risk in Finance. The same might be said as regards risks from biodiversity loss.

Cf. e.g. Bolton, Patrick et al. (2020). The Green Swan—Central Banking and Financial Stability in the Age of Climate Change, pp. 23 et seqq.

Cf. Chapter 8 on Climate Change as a Systemic Risk in Finance.

Cf. e.g. the seminal paper Rockström, Johan et al. (2009). “A safe operating space for humanity”. Nature, 461, pp. 472–475.

Cf. Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 799 et seq w.f.r.

Schnabel, Isabel. (2021). “Climate change and monetary policy”. Finance & Development, p. 54.

See e.g. Schnabel, Isabel. (2022). “A new age of energy inflation: Climateflation, fossilflation and greenflation”. Speech at The ECB and its Watchers XXII Conference, 17 March; ECB. (2023). “The outlook is mixed: the asymmetric effects of weather shocks on inflation”. ECB Research Bulletin, No 111; Cf. also Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 801.

Cf. Mauderer, Sabine. (2023). “Climate change, biodiversity loss and the role of central banks”. Deutsche Bundesbank Spring Conference 2023—Climate Change and Central Banks, 11 May.

Schnabel, Isabel. (2021). “Climate Change and Monetary Policy”. Finance & Development, p. 54.

Cf. e.g. ECB. (2021). “Climate change and monetary policy in the euro area”. Occasional Paper Series, No 271, p. 121 et seq.

Schnabel, Isabel. (2021). “Climate change and monetary policy”. Finance & Development, p. 54.

Also supervisory decisions by the ECB may have a climate impact, but these questions lie outside the scope of this chapter.

On the ECB’s organisational carbon footprint cf. ECB. (2022). ECB Environmental Statement 2022.

Cf. Decision (EU) 2016/948 on the implementation of the corporate sector purchase programme (ECB/2016/16) (ECB/2022/29) [2022] OJ L 241/13.

Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, pp. 809 et seq.

Cf. Papoutsi, Melina, Piazzesi, Monika & Schneider, Martin (2022). “How unconventional is green monetary policy”. Working Paper.

Schnabel, Isabel. (2021). “Climate change and monetary policy”. Finance & Development, p. 55. Cf. also Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, pp. 801, 809 et seq w.f.r.

Cf. Decision (EU) 2022/1613 of the European Central Bank of 9 September 2022 amending Decision (EU) 2016/948 on the implementation of the corporate sector purchase programme (ECB/2016/16), ECB/2022/29, OJ L 241, 19.9.2022, p. 13.

ECB Press Release. (22 Sept 2020). ECB to accept sustainability-linked bonds as collateral.

The climate agenda also contains measures pertaining to supervisory tasks of the ECB, which are not covered by this chapter.

ECB. (2021). The ECB’s monetary policy strategy statement.

NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March.

ECB Press Release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations; the adjustment of the corporate sector purchase programme (CSPP) was effected by Decision (EU) 2022/1613; see further below Sect. 11.4.4.

Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting, OJ L 322, 16.12.2022, p. 15.

ECB. (30 January 2024). Climate and nature plan 2024–2025; cf., on possible implications biodiversity risks for monetary policy, e.g. Mauderer, Sabine. (2023). “Climate change, biodiversity loss and the role of central banks”. Deutsche Bundesbank Spring Conference 2023—Climate Change and Central Banks, 11 May; Elderson, Frank. (2023). “The economy and banks need nature to survive”. The ECB Blog, 8 June.

See Article 129(1) TFEU.

See Article 3(1)(c), Article 127(1), as well as Article 282 TFEU.

Article 5(2) TEU.

Cf. Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, p. 6.

Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, p. 4.

Cf. Articles 2(3), 5(1) and 119 et seq. TFEU.

See also Article 282(2) TFEU and Article 2 ESCB/ECB-Statute (Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Bank, consolidated version: OJ C 202, 7.6.2016, p. 230).

Cf. also Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 807.

BVerfG Judgment of the Second Senate of 12 October 1993—2 BvR 2134/92, 2 BvR 2159/92 (“Maastricht-decision”), para 138.

E.g. Wutscher, Claudia. (2019). “Artikel 127 AEUV”. In: Schwarze, Jürgen et al. (eds.), EU-Kommentar, para 4 w.f.r. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1378, thus proposes to see the objective of price stability “as a specific notion of economic equality”.

Of course, this does not mean that the value of money is guaranteed by the issuer, i.e. that there is an individual right to value preservation, cf. e.g. Ohler, Christoph. (2015). Bankenaufsicht und Geldpolitik in der Währungsunion, § 1 Rz 46.

Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 55.

ECB. (2021). The ECB’s monetary policy strategy statement, point 8.

The monetary policy strategy of 1998 stipulated: “Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. Price stability is to be maintained over the medium term”.

See ECB. (2003). The ECB's monetary policy strategy. This policy included a price stability target of below, but close to 2% over the medium term.

Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 56.

See above Sect. 11.2.1.

OJ C 202, 7.6.2016, p. 281.

Article 1 Protocol (No 13).

Consequently, the Harmonised Index of Consumer Prices (HICP) used to target inflation does so using an average value for the whole euro area. Cf. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1355.

Cf. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1354.

The term refers to the transfer of monetary policy impulses to the real economy.

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, para 50. Cf. also Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 65. Cf., again Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, pp. 9 et seq; Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, p. 368; of course, monetary policy transmission is not linear and immediate, but is always context-dependent, susceptible to delays and distortions, cf. Sander, Florian. (2018). “‘Gestörte geldpolitische Transmission’—eine kompetenzrechtliche Sackgasse”. Juristenzeitung, 73, p. 530, who is generally critical of the criterion of restoring monetary policy transmission.

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, paras 51–52. Cf. also Case C-370/12 Pringle [2012], ECLI:EU:C:2012:756, para 56.

E.g. Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, p. 16.

100

101

E.g. Elderson, Frank. (2023). “Policymakers as policy takers—Accounting for climate-related and environmental factors in banking supervision and monetary policy”. Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Peterson Institute for International Economics, Washington DC, 21 April.

102

Cf. Kaufhold, Ann-Kathrin. (2022). “Grüne Geldpolitik—Zu den Grundsätzen der Kompetenzverteilung zwischen der EU und den Mitgliedstaaten am Beispiel CO2-orientierter Zentralbankmaßnahmen”. In: Kahl, Wolfgang & Mager, Ute (eds.), Verwaltungsaufgaben und Legitimation der Verwaltung, p. 156. It also limits potential ECB measures where the “general economic policies” are so broad that “supporting” them would require autonomous policy-making; see Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, p. 17.

103

Cf. Wutscher, Claudia. (2019). “Artikel 127 AEUV”. In: Schwarze, Jürgen et al. (eds.), EU-Kommentar, para 11; Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, p. 372 et seq.

104

Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (“European Climate Law”), OJ L 243, 9.7.2021, p. 1.

105

See Article 5 of the European Climate Law. On this discussion, cf., on the one hand, de Arriba-Sellier, Nathan. (2023). “Obligations without accountability? The ECB and the European Climate Law”. EuLawLive Op-Ed, 18 July, who tentatively includes the ECB among the “relevant Union institutions”, and, on the other hand, Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, p. 282 et seq, who do not see the ECB as a “relevant Union institution”, while nonetheless pointing out the relevance of the European Climate Law for the secondary objective.

106

Recital 3 of Decision (EU) 2022/1613.

107

See Guideline 5 of Council Recommendation of 13 July 2010 on broad guidelines for the economic policies of the Member States and of the Union, OJ L 191, 23.7.2010, p. 28.

108

Armstrong McKay, David I. et al. (2022). “Exceeding 1.5 °C global warming could trigger multiple climate tipping points”. Science, 377(6611), eabn7950.

109

See below Sect. 11.3.3.1.

110

Calliess, Christian & Dross, Miriam. (2020). “Umwelt- und Klimaschutz als integraler Bestandteil der Wirtschaftspolitik”. Zeitschrift für Umweltrecht, 30, p. 456.

111

Cf. for environmental policy Articles 191 and 192 TFEU, according to which the Council and the Parliament are responsible in the ordinary legislative procedure.

112

Cf. e.g. Case C-405/92 Etablissements Armand Mondiet [1993] ECLI:EU:C:1993:906, para 24 et seq; Case C-336/00 Huber [2002] ECLI:EU:C:2002:509, paras 31 and 33; Case C-377/12 Commission v. Council [2014] ECLI:EU:C:2014:1903, para 34.

113

Cf. also Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 807 Kaufhold, Ann-Kathrin. (2022). “Grüne Geldpolitik—Zu den Grundsätzen der Kompetenzverteilung zwischen der EU und den Mitgliedstaaten am Beispiel CO2-orientierter Zentralbankmaßnahmen”. In: Kahl, Wolfgang & Mager, Ute (eds.), Verwaltungsaufgaben und Legitimation der Verwaltung, p. 154. Cf. Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, paras 41 et seqq. For more on measures and instruments of a green monetary policy, see below Sect. 11.4.

114

115

Schnabel, Isabel. (2023). “Monetary policy tightening and the green transition”. Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the International Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm, 10 January. Schnabel argues, however, that price stability is also a condition for the sustainable transformation of the economy.

116

117

Cf. Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, p. 374; Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, p. 15; Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, pp. 808, 812.

118

119

In this sense, as Klaus Touri put it at the 2023 ECB Legal Conference, it might be understood as a specific non-isolation and sincere cooperation clause. See Tuori, Klaus. (2023). “The constitutional assessment of the ECB’s objectives and tasks outside monetary policy”. In: ECB (ed.), Treading softly: How central banks are addressing current global challenges, ECB Legal Conference 2023, p. 37 (p. 51). Accordingly, and also with regard to art 7 TFEU, the ECB should avoid undermining general economic policies as far as possible without jeopardizing the stability objective, cf. Ioannidis, Michael, Hlásková Murphy, Sarah Jane & Zilioli, Chiara. (2021). “The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276, p. 15.

120

121

See below Sect. 11.4.4.

122

In September 2021, the study on the ECB’s mandate by Michael Ioannidis, Sarah Jane Hlásková Murphy and Chiara Zilioli (“The mandate of the ECB. Legal considerations in the ECB’s monetary policy strategy review”. Occasional Paper Series, No 276) still stated that the “ECB has not to date relied on the secondary objective as an explicit legal basis for its monetary policy measures” (p. 13).

123

Recital 3 of Decision (EU) 2022/1613.

124

ECB. (2021). The ECB’s monetary policy strategy statement.

See also Article 1 Protocol (No 2) on the application of the principles of subsidiarity and proportionality, OJ C 115, 9.5.2008, p. 206, according to which “Each institution shall ensure constant respect for the principles of subsidiarity and proportionality, as laid down in Article 5 of the Treaty on European Union”. Article 13(1) TEU also lists the ECB among the Union institutions. Cf. Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, para 66; Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 71.

129

See above Sect. 11.3.1.

130

Cf. BVerfG, Judgment of the Second Senate of 5 May 2020—2 BvR 859/15, paras 133 et seq. Cf. also Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1378.

131

Cf. Kaufhold, Ann-Kathrin. (2022). “Grüne Geldpolitik—Zu den Grundsätzen der Kompetenzverteilung zwischen der EU und den Mitgliedstaaten am Beispiel CO2-orientierter Zentralbankmaßnahmen”. In: Kahl, Wolfgang & Mager, Ute (eds.), Verwaltungsaufgaben und Legitimation der Verwaltung, p. 152. Critical as to the use of the principle of proportionality as a benchmark for judicial review Tuori, Klaus. (2023). “The constitutional assessment of the ECB’s objectives and tasks outside monetary policy”. In: ECB (ed.), Treading softly: How central banks are addressing current global challenges, ECB Legal Conference 2023, p. 37 (p. 51 et seq.).

132

Bast, Jürgen. (2023). “Artikel 5 EUV”. In: Grabitz, Eberhard, Hilf, Meinhard & Nettesheim, Martin (eds.), Das Recht der Europäischen Union, 79th supplement, para 70.

133

Case C-70/88, Parliament v. Council [1991]ECLI:EU:C:1991:373, para 9.

134

Kischel, Uwe. (2000). “Die Kontrolle der Verhältnismäßigkeit durch den Europäischen Gerichtshof”. Europarecht, 35, pp. 383, 391.

135

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, paras 72 et seq.; Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, paras 74 et seq.

136

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, paras 81 et seq.; Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, paras 79 et seq. Cf. Recital 4 of Decision (EU) 2022/1613.

137

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, para 91; Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 93.

138

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, para 68, 75; Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, paras 73, 91.

139

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, paras 74 et seq.; cf. also Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, paras 24, 56, 78, 91; from the literature cf. e.g. Goldmann, Matthias. (2014). “Adjudicating Economics? Central Bank Independence and the Appropriate Standard of Judicial Review”. German Law Journal, 15, pp. 266 et seq; Wutscher, Claudia. (2015). “‘Whatever it takes’. Das OMT-Programm und die Rolle der EZB in der Krisenbewältigung”. Zeitschrift für Öffentliches Recht, 70, p. 391 w.f.r.; see also the Opinion of AG Cruz Villalón in Case C-62/14, Gauweiler [2015] ECLI:EU:C:2015:7, para 111, according to which the courts must “avoid the risk of supplanting the Bank, by venturing into a highly technical terrain in which it is necessary to have an expertise and experience which, according to the Treaties, devolves solely upon the ECB”. The German FCC is very critical of this reduction in the density of control in the decisions on OMT and PSPP; see BVerfG, Judgment of the Second Senate of 21 June 2016—2 BvR 2728/13, para 186; BVerfG, Judgment of the Second Senate of 5 May 2020—2 BvR 859/15 -, paras 156 et seqq. Cf. also Sander, Florian. (2018). “‘Gestörte geldpolitische Transmission’—eine kompetenzrechtliche Sackgasse”. Juristenzeitung, 73, p. 533, who sees the court’s restraint as a “declaration of surrender”.

140

Articles 130 and 282(3) TFEU.

141

Cf. BVerfG, Judgment of the Second Senate of 21 June 2016—2 BvR 2728/13, para 189 et seq; BVerfG, Order of the First Senate of 24 March 2021—1 BvR 2656/18, paras 143 et seq.

142

The FCC accuses the CJEU thereof in the PSPP judgement, BVerfG, Judgment of the Second Senate of 5 May 2020—2 BvR 859/15 -, para 136. Cf. also BVerfG, Judgment of the Second Senate of 21 June 2016—2 BvR 2728/13, paras 131 et seq.

143

Sander, Florian. (2018). “‘Gestörte geldpolitische Transmission’—eine kompetenzrechtliche Sackgasse”. Juristenzeitung, 73, pp. 530 et seq., 533. Cf. Case C-376/98, Germany and Parliament v. Council (‘tobacco advertising’) [2000] ECLI:EU:C:2000:544, paras 84 et seq.

144

145

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, para 69, Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 30.

146

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1362.

147

Cf. also Article 5 of the Protocol (No 2) on the application of the principles of subsidiarity and proportionality, according to which (only) draft legislative acts in the ordinary legislative procedure “should contain a detailed statement making it possible to appraise compliance with the principles of subsidiarity and proportionality”.

148

Case C-62/14 Gauweiler [2015], ECLI:EU:C:2015:400, para 68; Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, paras 73.

149

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1381.

150

Article 127(1) third sentence TFEU, cf. also Article 119(2) TFEU and Article 2 ESCB/ECB-Statute.

151

152

Cf. Cœuré, Benoît. (2015). “Embarking on public sector asset purchases”. Second International Conference on Sovereign Bond Markets, Frankfurt, 10 March.

153

ECB. (2017). Economic Bulletin, Issue 4, p. 41. Cf. also Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1358.

154

155

ECB. (2017). Economic Bulletin, Issue 4, p. 41.

156

Cf. ECB. (2017). Economic Bulletin, Issue 4, p. 41.

157

Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, para 82.

158

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1357.

159

Among other reasons, this correlation is caused by inherent limitations and restrictions of bond markets as well as a lack of information and a lack of pricing in the externalities of climate change; cf. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, pp. 1370 et seq.

160

Cf. above Sect. 11.2.1 and Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 407 w.f.r.

161

Dietz Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 409 w.f.r.

162

Cf. Schnabel, Isabel (2021). “From market neutrality to market efficiency”. Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the ECB DG-Research Symposium “Climate change, financial markets and green growth”, Frankfurt am Main, 14 June.

163

Selmayr, Martin. (2015). “Artikel 282 AEUV”. In: von der Groeben, Hans, Schwarze, Jürgen & Hatje, Armin (eds.), Europäisches Unionrecht, 7th edition, para 59; generally sceptical as to whether the principle of an open market economy should require a market neutrality approach, Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, p. 317; Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 818.

164

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1361.

165

ECB Press Release. (6 Sept 2012). Technical features of Outright Monetary Transactions.

166

ECB Press Release. (21 July 2022). The Transmission Protection Instrument.

167

Somewhat paradoxically, the “singleness” of the monetary policy was invoked to justify the selectivity of the OMT programme; see, again, ECB Press Release. (6 Sept 2012). Technical features of Outright Monetary Transactions. Cf. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, pp. 1362 et seq.

168

See Schnabel, Isabel. (2021). “From market neutrality to market efficiency”. Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the ECB DG-Research Symposium “Climate change, financial markets and green growth”, Frankfurt am Main, 14 June.

169

Decision (EU) 2022/1613 (ECB/2022/29) made it possible to set purchase limits for issuer groups on the basis of climate change mitigation aspects within the framework of the CSPP.

170

See below Sect. 11.4.4.

171

It can also be argued that bond purchase programmes always impact relative bond prices; see Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, p. 317.

172

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1358. Initiatives such as the proposal for an “EU Listing Act” (COM(2022) 762 final) intend to facilitate access to capital markets in the future, especially for SMEs.

173

Cf. Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1370. The emission bias resulting from the structure of the bond market is further aggravated by eligibility criteria excluding the financial sector.

174

See Article 13(1) TEU.

175

See Article 51(1) CFR. See also Case T-107/17, Steinhoff et al. [2019] ECLI:EU:T:2019:353, paras 95, 98.

176

Article 20, 21 CFR. Cf., for an assessment of equality as an objective of monetary policy, in the conceptualization of monetary policy measures as well as of distributional effects and monetary policy transmission, Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, pp. 1349–1382.

177

Article 17 CFR.

178

Article 16 CFR.

179

Case T-79/13, Accortini [2015] ECLI:EU:T:2015:756, para 87.

180

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, p. 1355.

181

Article 52(1) CFR.

182

Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088, OJ L 198, 22.6.2020, p. 13.

183

Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds, OJ L 2631, 30.11.2023, p. 1.

184

Cf. e.g. Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 312 et seq.

185

Fundamental rights thus also require procedural standards (in particular: reasoned, substantiated decision-making) to be met in order to enable a review of the proportionality of limitations to such rights.

186

See below Sect. 11.3.3.2.

187

See above Sect. 11.3.2.2; Selmayr, Martin. (2015). “Artikel 282 AEUV”. In: von der Groeben, Hans, Schwarze, Jürgen & Hatje, Armin (eds.), Europäisches Unionrecht, 7th edition, para 53; cf. Case C-9/99, Échirolles [2000] ECLI:EU:C:2000:532, para 25.

188

Cf., as regards Articles 20, 21 CFR, Case T-79/13, Accortini [2015] ECLI:EU:T:2015:756.

189

Case C-133/06, Parliament v. Council [2008]ECLI:EU:C:2008:257, para 57; Case C-70/88, Parliament v. Council [1990] ECLI:EU:C:1990:217, para 22.

190

See Articles 2 et seq TFEU.

191

Case C-70/88, Parliament v. Council [1990] ECLI:EU:C:1990:217, para 22. Cf. e.g. Case C-377/12 Commission v. Council [2014] ECLI:EU:C:2014:1903, para 34.

Cf., again, for instance, Elderson, Frank. (2023). “Policymakers as policy takers—Accounting for climate-related and environmental factors in banking supervision and monetary policy”, Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Peterson Institute for International Economics, Washington DC, 21 April.

196

See Opinion of A.G. Jacobs in Case C-379/98, PreussenElektra [2000] ECLI:EU:C:2000:585, para 231. Cf. also Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 803 et seq w.f.r.

197

Cf. Nettesheim, Martin. (2022). “Artikel 11 AEUV”. In: Grabitz, Eberhard, Hilf, Meinhard & Nettesheim, Martin (eds.), Das Recht der Europäischen Union, 79th supplement, para 13; Calliess, Christian. (2022). “Artikel 11 AEUV”. In: Calliess, Christian & Ruffert, Mattthias (eds.), EUV/AEUV, 6th edition, para 24.

198

199

Cf., in particular, Article 191(2) TFEU. Cf. also Communication from the Commission on the precautionary principle of 2 February 2000, COM(2000) 1 final.

200

Calliess, Christian. (2021). “Klimapolitik und Grundrechtsschutz”. Zeitschrift für Umweltrecht, 31, p. 330.

201

Cf. Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 805, according to which the precautionary principle includes a principle of non-exhaustion of planetary boundaries.

202

Calliess, Christian & Dross, Miriam. (2020). “Umwelt- und Klimaschutz als integraler Bestandteil der Wirtschaftspolitik”. Zeitschrift für Umweltrecht, 30, p. 462.

203

Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, pp. 378 et seq; Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24; Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 803; Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 413 w.f.r.

204

E.g. Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 413; Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 812.

205

See above Sect. 11.3.2.4.

206

See also Case C-733/19, Netherlands v. Council [2021]ECLI:EU:C:2021:272, para 48, according to which the reference to Article 11 TFEU and an environmental policy objective does not yet make a measure an environmental policy measure within the meaning of Articles 191 et seq. TFEU.

207

Cf. Zilioli, Chiara & Ioannidis, Michael. (2022). “Climate change and the mandate of the ECB: Potential and limits of monetary contribution to European green policies”. Common Market Law Review, 59, p. 282 et seq.; critical of this position de Arriba-Sellier, Nathan. (2023). “Obligations without accountability? The ECB and the European Climate Law”. EuLawLive Op-Ed, 18 July.

208

Cf. Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, p. 811.

209

Cf. the Explanation on Art 37 (2007/C 303/02).

210

Cf. e.g. Madner, Verena. (2019). “Artikel 37 GRC”. In: Holoubek, Michael & Lienbacher, Georg (eds.), GRC-Kommentar, 2nd edition, paras 10, 15.

211

Madner, Verena. (2019). “Artikel 37 GRC”. In: Holoubek, Michael & Lienbacher, Georg (eds.), GRC-Kommentar, 2nd edition, para 22.

212

Cf. the Declaration concerning the Charter of Fundamental Rights of the European Union annexed to the Final Act of the Intergovernmental Conference which Adopted the Treaty of Lisbon, which states that “The Charter does not extend the field of application of Union law beyond the powers of the Union or establish any new power or task for the Union, or modify powers and tasks as defined by the Treaties.”.

213

See above Sect. 11.3.1.

214

Decision 15/4 of 18 December 2022, Kunming-Montreal Global Biodiversity Framework, CBD/COP/15/L25.

215

Convention on Biological Diversity of 5 June 1992, UN Treaty Series, vol. 1760, p. 79, TREATIES-XXVII.8.

216

Cf., again, e.g. the European Climate Law, which is part of the so-called European Green Deal; cf. Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions, The European Green Deal, COM/2019/640 final.

217

218

BVerfG, Order of the First Senate of 24 March 2021—1 BvR 2656/18, para 117.

219

Cf. e.g. UN Environment Programme. (2015). “Climate change and human rights”. Report, December.

220

Cf., however, calls in the literature to introduce such an enforceable right; e.g. Calliess, Christian. (2021). “Klimapolitik und Grundrechtsschutz”. Zeitschrift für Umweltrecht, 31, pp. 323–332.

221

Cf. e.g. the cases brought before the European Court of Human Rights (ECHR) by six Portuguese children and young people (Duarte Agostinho and Others v. Portugal and 32 other States, 39371/20) or by elderly women (Verein KlimaSeniorinnen Schweiz and others v. Switzerland, 53600/20). The ECB and national central banks also face climate lawsuits and monitor their development; cf. Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 296 et seq w.f.r.

222

Cf. NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, p. 18.

223

224

Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions, Action Plan: Financing Sustainable Growth, COM/2018/097 final.

225

In particular, the inclusion of nuclear energy as well as of fossil gas by Commission Delegated Regulation (EU) 2022/1214 (OJ L 188, 15.7.2022, p. 1) has sparked criticism and also led to several challenges of said Regulation before the CJEU, notably an action for annulment by Austria (pending since 7 October 2022 as Case T-625/22, Austria v. Commission).

226

Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, OJ L 317, 9.12.2019, p. 1. See Chapter 14 in this volume.

227

E.g. by refusing to accept collateral for which no sustainability information has been disclosed.

228

Cf. the information on the ECB’s website, Our approach to our climate objectives.

229

Specifically, indicators for green financial instruments, for climate-related physical risks to which financial institutions are exposed through their portfolios and for measuring the CO₂ footprint of financial institutions’ portfolios are developed. See ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy, including the “Detailed roadmap of climate change-related actions”. See also ECB. (2021). “Climate change and monetary policy in the euro area”. Occasional Paper Series, No 271, p. 62 et seq.

230

ECB. (2022). ECB climate agenda 2022, pp. 2 et seq.

231

ECB. (2022). ECB climate agenda 2022, p. 3.

232

Cf., again, ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy, including the “Detailed roadmap of climate change-related actions”; see also ECB. (2022). ECB climate agenda 2022, p. 3. When other financial market actors are increasingly bound by sustainability-related disclosure obligations, it makes sense that the ECB would also try and make the carbon footprint of the assets on their own balance sheet transparent.

233

ECB press release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations.

234

See also ECB. (2022). ECB climate agenda 2022, p. 1.

235

For so-called targeted longer-term refinancing operations (TLTRO), see most recently Decision (EU) 2019/1311 of the European Central Bank of 22 July 2019 on a third series of targeted longer-term refinancing operations (ECB/2019/21), OJ L 204, 2.8.2019, p. 100. On a potential “greening” of those TLTROs see Colesanti Senni, Chiara, Sole Pagliari, Maria & van ‘t Klooster, Jens. (2023). “The CO2 content of the TLTRO III scheme and its greening”. Centre for Climate Change Economics and Policy Working Paper 422/Grantham Research Institute on Climate Change and the Environment Working Paper No 398, May.

236

The three key ECB interest rates are the interest rate on the main refinancing operations and the interest rates on the marginal lending facility as well as the deposit facility. Cf. Guideline (EU) 2015/510 of the European Central Bank of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (recast) (ECB/2014/60), OJ L 91, 2.4.2015, p. 3, on details on these operations and standing facilities.

237

ECB. (2021). The ECB’s monetary policy strategy statement, point 8.

238

See ECB. (2021). The ECB’s monetary policy strategy statement, point 9.

239

Cf. e.g. NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, p. 4 et seq; ECB. (2021). The ECB’s monetary policy strategy statement, point 10.

240

See above Sect. 11.3.3.1. Cf. Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 418.

241

Kaufhold, Ann-Kathrin. (2022). “Grüne Geldpolitik—Zu den Grundsätzen der Kompetenzverteilung zwischen der EU und den Mitgliedstaaten am Beispiel CO2-orientierter Zentralbankmaßnahmen”. In: Kahl, Wolfgang & Mager, Ute (eds.), Verwaltungsaufgaben und Legitimation der Verwaltung, p. 145; NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 5, 31 et seqq.

242

In particular: credit institutions.

243

NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 5, 31 et seq. Cf. Kaufhold, Ann-Kathrin. (2022). “Grüne Geldpolitik—Zu den Grundsätzen der Kompetenzverteilung zwischen der EU und den Mitgliedstaaten am Beispiel CO2-orientierter Zentralbankmaßnahmen”. In: Kahl, Wolfgang & Mager, Ute (eds.), Verwaltungsaufgaben und Legitimation der Verwaltung, p. 136.

244

Cf. again NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, p. 5. Cf., on the possibility of Green Targeted Refinancing Operations Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 301 et seq.

245

On the risk that the restriction of counterparties could impair the effectiveness of monetary policy decisions, see NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 6, 32.

246

Cf. Case T-79/13, Accortini [2015] ECLI:EU:T:2015:756, paras 85 et seq.

247

ECB press release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations.

248

Cf. NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 5, 35 et seqq. Cf. Part Four (Articles 58 et seqq.) Guideline (EU) 2015/510 (ECB/2014/60), for current rules on eligible assets.

249

See ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy and, as an annex, the “Detailed roadmap of climate change-related actions”. See also ECB press release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations, where this was again affirmed.

250

ECB press release. (22 Sept 2020). ECB to accept sustainability-linked bonds as collateral.

251

Thus, they hold the prospect of paying an additional coupon premium in the event of non-compliance with these targets; see Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, pp. 401 et seq.

252

ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy. See also Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, pp. 401 et seq. Classic “green bonds”, on the other hand, were always permitted provided that the general conditions were met.

253

Cf. already ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy and, as an annex, the “Detailed roadmap of climate change-related actions”. Cf. also Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 299 et seq.

254

This is also referred to as “haircuts”.

255

Cf. NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 5, 35 et seq.

256

ECB press release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations. Cf., however, most recently the “Climate and nature plan 2024–2025”, in which the ECB pledges to implement climate-related pool limits in the collateral framework, provided all technical conditions are in place.

257

ECB press release. (20 Dec 2022). ECB reviews its risk control framework for credit operations.

258

ECB press release. (4 July 2022). ECB takes further steps to incorporate climate change into its monetary policy operations. Cf. recently the “Climate and nature plan 2024–2025”, which foresees this introduction “from 2026”.

259

Article 18.2. ESCB/ECB-Statute.

260

Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, p. 305.

261

A threat to the stability objective could also be caused by a mere reduction in the effectiveness of key interest rate decisions, which might occur when access to central bank liquidity is significantly restricted. Overall, however, the collateral requirements have less of a direct impact on the transmission mechanism as do changes in the rules on credit operations. See on the possible effects of the different options for the inclusion of climate protection aspects in the regulations on collateral, NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 36, 37 et seq, 38 et seq. On the collateral framework as “a constant balancing act between the avoidance of financial losses on the one hand and the considerations arising from the monetary policy objectives on the other hand” Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 304 et seq.

262

Cf. Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, p. 305: “Mere politically motivated changes that aim to increase recourse to green collateral for other reasons are not admissible”.

263

According to Article 18.1. ESCB/ECB-Statute, in order to achieve the objectives of the ESCB, the ECB may “operate in the financial markets by buying and selling outright (spot and forward) or under repurchase agreement and by lending or borrowing claims and marketable instruments, whether in euro or other currencies, as well as precious metals”.

264

The ECB’s asset purchase programme (APP) includes the corporate sector purchase programme (CSPP, as defined in Decision ECB/2016/16 as amended by ECB/2022/29), public sector purchase programme (PSPP, as defined in Decision ECB/2020/9), asset-backed securities purchase programme (ABSPP, as defined in Decision ECB/2014/45) and covered bonds purchase programme (third covered bond purchase programme, CBPP3, in accordance with Decision ECB/2020/8). The OMT (Outright Monetary Transactions) programme, which has never been applied, and in view of the decisions of the FCC and the CJEU, has also been the subject of much legal discussion, can also be counted among the purchase programmes. Although the temporary pandemic emergency purchase programme (PEPP) for the purchase of private and public sector securities (see Decision ECB/2020/17, OJ L 91/1) launched in response to the COVID pandemic has already expired, capital repayments from securities purchased under the PEPP will continue to be reinvested until at least the end of 2024. With the Transmission Protection Instrument (TPI), the ECB has (in view of strongly divergent spreads on government bonds) recently created another asset purchase instrument, with which unlimited (in particular) government bonds could be purchased on the secondary market.

265

In an environment with (too) high inflation, at least a continuous reduction in the amount of assets held—by not reinvesting (or expanding) principal payments from maturing securities—could be warranted. Against this background, the ECB has decided to stop net asset purchases under the APP from July 2022. It has also announced that the Eurosystem will no longer reinvest all principal payments from maturing securities in the APP; cf. Schnabel, Isabel. (2023). “Monetary policy tightening and the green transition”. Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the International Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm, 10 January.

266

See, again, the Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds, OJ L 2631, 30.11.2023, p. 1.

267

Cf. the indicator for measuring the CO₂ footprint of financial institutions’ portfolios announced in the action plan; ECB Press release. (8 July 2021). ECB presents action plan to include climate change considerations in its monetary policy strategy and, as an annex, the “Detailed roadmap of climate change-related actions”.

268

NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, pp. 5, 41 et seq.

269

Cf. Calliess, Christian & Tuncel, Ebru. (2023). “The role of Article 11 TFEU in the greening of the ECB’s monetary policy”. German Law Journal, 24, pp. 818 et seq., on the admissibility of an implementation of a new “Green Assets Purchase Programme”.

270

271

Recital 1 Decision (EU) 2022/1613 (ECB/2022/29) specifies the methodology: “The climate performance of issuers should be measured by reference to their greenhouse gas emissions, the level of ambition of their carbon reduction targets and their climate-related disclosures. The climate performance of issuers should be assessed and the tilting factors should be calculated using methodology approved by the Governing Council”.

272

Cf. Recitals 3, 4 Decision (EU) 2022/1613 (ECB/2022/29).

273

Case C-493/17 Weiss [2018] ECLI:EU:C:2018:1000, paras 94 et seq.

274

Cf. BVerfG, Order of the Second Senate of 14 January 2014—2 BvR 2728/13, paras 58 et seq.

275

Cf. Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 425; Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, pp. 1373 et seqq. Cf. also Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 319 et seq.

276

Dietz, Sara. (2023). “Central banks and inequality”. Common Market Law Review, 60, pp. 1349 et seq.

277

Recital 3 Decision (EU) 2016/948 (ECB/2016/16).

278

On the time horizon of monetary policy see above Sect. 11.3.1.1.

279

Cf. Weidmann, Jens. (2021). “What role should central banks play in combating climate change?” Remarks at the ILF Online-Conference “Green Banking and Green Central Banking: What are the right concepts?”, Goethe University Frankfurt, 25 January.

280

Recital 3 Decision (EU) 2022/1613 (ECB/2022/29). Although the ECB refers here to having designed the measure “to have a neutral effect on the monetary policy stance on overall financing conditions”, it does not provide any indication as to how it calculated the supposed neutrality towards the price stability objective. Even if additional documents could be submitted in court proceedings, a more detailed justification would have been appropriate. On the significance of a detailed justification for judicial review, in particular, of proportionality, see Sect. 11.3.2.1.

281

282

Dietz, Sara. (2022). “Green monetary policy between market neutrality and market efficiency”. Common Market Law Review, 59, p. 425.

283

In effect, such programmes can have similar effects to state aid; see Mayer, Matthias & Schürger, Jonas. (2023). “Green monetary policy in the EMU and its primary law limits”. In: Böffel, Lukas & Schürger, Jonas (eds.), Digitalisation, Sustainability, and the Banking and Capital Markets Union, EBI Studies in Banking and Capital Markets Law, pp. 324 et seq.

284

Article 19.1. ESCB/ECB-Statute.

285

Cf. Article 6(1) (b) Regulation (EU) 2021/378 of the European Central Bank of 22 January 2021 on the application of minimum reserve requirements (ECB/2021/1), OJ L 73, 3.3.2021, p. 1, as last amended by Regulation (EU) 2023/1679 of the European Central Bank of 25 August 2023 amending Regulation (EU) 2021/378 on the application of minimum reserve requirements (ECB/2021/1), ECB/2023/21, OJ L 216, 1.9.2023, p. 96.

286

Cf. Article 9(1) Regulation (EU) 2021/378 as amended by Regulation (EU) 2023/1679.

287

NGFS. (2021). Adapting central bank operations to a hotter world. Reviewing some options. Technical document/Report, March, p. 18.

288

Schnabel, Isabel. (2021). “Climate Change and Monetary Policy”. Finance & Development, p. 55.

289

Cf. de Boer, Nik & Van’t Klooster, Jens. (2020). “The ECB, the courts and the issue of democratic legitimacy after Weiss”. Common Market Law Review, 57, p. 1690.

290

Cf., again, BVerfG, Order of the Second Senate of 14 January 2014—2 BvR 2728/13, paras 58 et seq.

291

See above Sect. 11.3.2.1.

292

Cf., however, de Boer, Nik & Van’t Klooster, Jens. (2020). “The ECB, the courts and the issue of democratic legitimacy after Weiss”. Common Market Law Review, 57, p. 1722, who argue that “the Council can set out broad economic policy guidelines in accordance with the procedure of Article 121(2) TFEU and articulate how it sees the role of the ECB in realizing its secondary mandate”. cf. also Thiele, Alexander. (2023). “Proportionality in German constitutional law”. In: ECB (ed.), Treading softly: How central banks are addressing current global challenges, ECB Legal Conference 2023, p. 28 (p. 35 et seq.), who proposes a different interpretation of the ECB’s independence when it acts upon its secondary mandate.

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Title: The ECB’s New Green Monetary Policy
Author: Claudia Wutscher
Publisher: Springer International Publishing
Book: Sustainable Finance in Europe
Print ISBN: 978-3-031-53695-3

Electronic ISBN: 978-3-031-53696-0

Copyright Year: 2024
DOI: https://doi.org/10.1007/978-3-031-53696-0_11

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