Greening monetary policy in times of high inflation

Wednesday, April 19, 2023, at 14:00-15:30 Vienna time (CEST)

Mr. Evangelos Tabakis, Adviser, European Central Bank
Mr. Marton Varga, Senior Economist, Magyar Nemzeti Bank 

Mr. Laurent Millischer, Senior Economist, JVI

On 19 April, the JVI hosted a webinar on Green Monetary Policy in Times of High inflation. In recent years, many central banks have started implementing climate-related policies, ranging from measuring the carbon footprint of their operations to monitoring climate risks in financial sector supervision. Even in their core task – monetary policy – some central banks have started to act. 

Evangelos Tabakis from the European Central Bank (ECB) reviewed the menu of policy options as outlined in the 2021 report by the Network for Greening the Financial System (NGFS). He then presented the ECB’s green tweaks to its monetary policy instruments: the greening of its corporate bond holdings, changes to the collateral framework, disclosure requirements and improvements to risk assessment. He was joined by Márton Varga from the Hungarian National Bank (MNB), who presented the Hungarian experience with its green monetary policy instruments: a targeted refinancing facility for energy efficient residential mortgages, a green mortgage bond purchase program and changes to the collateral framework.

The presentations were followed by a lively Q&A session. In the current environment of high inflation, it was noted that some of the green monetary policy instruments were incompatible with central banks’ tightening stance. Thus, both MNB’s targeted refinancing operation and green bond purchase program were halted in 2022. Webinar participants enquired about options for greening monetary policy for central banks operating in an environment of structural excess liquidity and therefore mainly conducting liquidity absorbing operations. Including them in the next version of the NGFS report would be particularly interesting for countries in the JVI region.

Laurent Millischer, Senior Economist, JVI

The JVI focus on climate change 

If greenhouse gas emissions continue unabated, global temperatures will keep on rising beyond the Paris target of 1.5 degrees Celsius, with catastrophic implications for lives and livelihoods worldwide. Economic policy has a pivotal role to play in changing the ways we produce and consume in order to slow climate change.  

Countries in the JVI region will not be spared the economic costs of rising temperatures nor the difficult task of transforming their economies within the next thirty years to drastically reduce greenhouse gas emissions. Yet, this transformation also holds opportunities for countries in the region, such as public investment-triggered growth, good quality green jobs, and better health from reduced air pollution.  

In this context, the JVI offers two courses on the economics of climate change. The first one, “Climate Change and Green Finance”, coordinated by the Austrian Federal Ministry of Finance and the Austrian National Bank, takes place June 26-30, 2023. The second one, “Climate Change Economics”, coordinated by the JVI faculty, takes place September 4-8, 2023. We encourage everyone to apply

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