Keywords
sustainable monetary policy
green monetary policy instruments
sustainable development
How to Cite
Abstract
Green monetary policy is a monetary policy that, in addition to maintaining price stability, also aims to increase social welfare and promote environmental sustainability. The main aim of the paper is the identification and exegesis of the central banks’ activities towards green monetary policy. The research verifies the hypothesis stating that modern central bank instruments are evolving toward more sustainable tools of implementing monetary policy. The paper presents new instruments of green monetary policy, created by incorporating emission reduction targets into traditional monetary policy instruments. The controlled comparative case study indicates that major central banks have different approaches to redirecting their monetary policy toward sustainable development. Some of them, like the FED, remain sceptical about green monetary policy instruments, while others (like the ECB or Bank of Japan) incorporate them into monetary policy. The research allowed for the identification of the main green monetary policy instruments, and it also proved that at the moment, it is difficult to assess whether they are effective and achieve the desired objectives.
References
Águila, N., & Wullweber, J. (2024). Greener and cheaper: Green monetary policy in the era of inflation and high interest rates. Eurasian Economic Review, 14(1), 39–60. https://doi.org/10.1007/s40822-024-00266-y
Águila, N., & Wullweber, J. (2024a). Legitimising green monetary policies: Market liberalism, layered central banking, and the ECB’s ongoing discursive shift from environmental risks to price stability. Journal of European Public Policy, 32(3), 665-696. https://doi.org/10.1080/13501763.2024.2317969
Altavilla, C., Brugnolini, L., Gürkaynak, R. S., Motto, R., & Ragusa, G. (2019). Measuring euro area monetary policy. Journal of Monetary Economics, 108, 162–179. https://doi.org/10.1016/j.jmoneco.2019.08.016
Anderson, V. (2015). Green money: Reclaiming quantitative easing. Green/EFA Group in the European Parliament.
Bank of England. (2023). Greening our corporate bond purchase scheme (CBPS). https://www.bankofengland.co.uk/markets/greening-the-corporate-bond-purchase-scheme
Bank of Japan. (2021a). Fund-provisioning measure to support efforts on climate change: Preliminary outline. https://www.boj.or.jp/en/mopo/mpmdeci/mpr_2021/rel210721c.pdf
Bank of Japan. (2021b). The Bank of Japan’s strategy on climate change [Press release]. https://www.boj.or.jp/en/about/release_2021/rel210716b.pdf
Barmes, D., & Livingstone, Z. (2021). The green central banking scorecard: How green are G20 central banks and financial supervisors? Positive Money. https://doi.org/10.13140/RG.2.2.18246.59209
Battiston, S., & Monasterolo, I. (2019). How could the ECB’s monetary policy support the sustainable finance transition? https://www.finexus.uzh.ch/dam/jcr:0103ed7b-71e9-4e81-9941-ee61feefd851/ECB%20sustainable%20finance%2022%20MarchIM.pdf
Bolton, P., Despres, M., Pereira da Silva, L. A., Samama, F., & Svartzman, R. (2020). The green swan. Bank for International Settlements.
Boneva, L., Ferrucci, G., & Mongelli, F. P. (2022). Climate change and central banks: What role for monetary policy? Climate Policy, 22(6), 770–787. https://doi.org/10.1080/14693062.2022.2070119
Broniewicz, E., Jastrzębska, E., & Lulewicz-Sas, A. (2024). Environmental disclosures according to ESRS in ESG reporting of selected banks in Poland. Economics and Environment, 88(1), 719. https://doi.org/10.34659/eis.2024.88.1.719
Campiglio, E. (2016). Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy. Ecological Economics, 121, 220–230. https://doi.org/10.1016/j.ecolecon.2015.03.020
Carney, M. (2015). Breaking the tragedy of the horizon – Climate change and financial stability [Speech]. https://www.bankofengland.co.uk/speech/2015/breaking-the-tragedy-of-the-horizon-climate-change-and-financial-stability
Chenet, H., Ryan-Collins, J., & van Lerven, F. (2021). Finance, climate change and radical uncertainty: Towards a precautionary approach to financial policy. Ecological Economics, 183, 106957. https://doi.org/10.1016/j.ecolecon.2021.106957
Christophers, B. (2017). Climate change and financial instability: Risk disclosure and the problematics of neoliberal governance. Annals of the American Association of Geographers, 107(5), 1108–1127. https://doi.org/10.1080/24694452.2017.1293502
Couppey-Soubeyran, J. (2020). The role of monetary policy in the ecological transition: An overview of various greening options. Veblen Institute for Economic Reforms.
D’Orazio, P., & Popoyan, L. (2019). Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies? Ecological Economics, 160, 25–37. https://doi.org/10.1016/j.ecolecon.2019.01.029
Dafermos, Y., Gabor, D., Nikolaidi, M., Pawloff, A., & van Lerven, F. (2020). Decarbonising is easy—Beyond market neutrality in the ECB’s corporate QE. New Economics Foundation.
Dafermos, Y., Gabor, D., Nikolaidi, M., Pawloff, A., & van Lerven, F. (2021). Greening the Eurosystem collateral framework: How to decarbonise the ECB’s monetary policy. New Economics Foundation.
Dafermos, Y., Gabor, D., Nikolaidi, M., & van Lerven, F. (2022). An environmental mandate, now what? Alternatives for greening the Bank of England’s corporate bond purchases. SOAS University of London; University of Greenwich; University of the West of England. https://eprints.soas.ac.uk/36190/
Dafermos, Y., & Nikolaidi, M. (2021). How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis. Journal of Financial Stability, 54, 100871. https://doi.org/10.1016/j.jfs.2021.100871
Dafermos, Y., Nikolaidi, M., & Galanis, G. (2018). Climate change, financial stability and monetary policy. Ecological Economics, 152, 219–234. https://doi.org/10.1016/j.ecolecon.2018.05.011
Dikau, S., & Ryan-Collins, J. (2017). Green central banking in emerging market and developing country economies. New Economics Foundation.
Dutkiewicz, B., & Przybylska-Kapuścińska, W. (2017). Nadzwyczajne instrumenty polityki pieniężnej. In W. Przybylska-Kapuścińska & M. Szyszko (Eds.), Współczesna polityka pieniężna. Perspektywa XXI wieku (pp. 170–202). Difin. (in Polish).
European Central Bank. (2018). Ten years after the crisis – Risks, rules and supervision [Press release]. https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp181030.en.html
European Central Bank. (2021). ECB presents action plan to include climate change considerations in its monetary policy strategy [Press release]. https://www.ecb.europa.eu/press/pr/date/2021/html/ecb.pr210708_1~f104919225.en.html
European Central Bank. (2022). ECB takes further steps to incorporate climate change into its monetary policy operations [Press release]. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220704~4f48a72462.en.html
European Central Bank. (2024). Speeches dataset. https://www.ecb.europa.eu/press/key/html/downloads.en.html
Elderson, F. (2023). Monetary policy in the climate and nature crises: Preserving a Stabilitätskultur [Speech]. https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp231122~e12db02da3.en.html
Esposito, L., Mastromatteo, G., & Molocchi, A. (2019). Environment–risk-weighted assets: Allowing banking supervision and green economy to meet for good. Journal of Sustainable Finance and Investment, 9(1), 68–86. https://doi.org/10.1080/20430795.2018.1540171
Ferrari, A., & Nispi Landi, V. (2023). Toward a green economy: The role of central bank’s asset purchases. International Journal of Central Banking, 19(5), 287–340. https://ideas.repec.org/a/ijc/ijcjou/y2023q5a7.html
Gabor, D., Dafermos, Y., Nikolaidi, M., Rice, P., van Lerven, F., Kerslake, R., Pettifor, A., & Jacobs, M. (2019). Finance and climate change: A progressive green finance strategy for the UK. Independent Panel. https://labour.org.uk/wp-content/uploads/2019/11/12851_19-Finance-and-Climate-Change-Report.pdf
George, A., Guang, J., & Xie, T. (2022). Assessing the dual mandates of sustainability-linked monetary policy. Energy Economics, 113, 106211. https://doi.org/10.1016/j.eneco.2022.106211
Gerring, J., & Cojocaru, L. (2016). Selecting cases for intensive analysis: A diversity of goals and methods. Sociological Methods & Research, 45(3), 392–423. https://doi.org/10.1177/0049124116631692
Issing, O. (2021). Green monetary policy? In A. Dombret & P. S. Kenadjian (Eds.), Green banking and green central banking (pp. 187–188). De Gruyter.
Krebel, L., & van Lerven, F. (2022). Green credit guidance: A green term funding scheme for a cooler future. New Economics Foundation. https://neweconomics.org/uploads/files/NEF_GCG.pdf
Matikainen, S., Campiglio, E., & Zenghelis, D. (2017). The climate impact of quantitative easing (Policy Paper). Centre for Climate Change Economics and Policy; Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science.
McConnell, A., Yanovski, B., & Lessmann, K. (2022). Central bank collateral as a green monetary policy instrument. Climate Policy, 22(3), 339–355. https://doi.org/10.1080/14693062.2021.2012112
Neszveda, G., & Siket, B. (2023). Green ECB speeches matter. Journal of Sustainable Finance & Investment, 15(2), 438-455. https://doi.org/10.1080/20430795.2023.2253205
Network for Greening the Financial System. (2018). NGFS first progress report.
Network for Greening the Financial System. (2019). A call for action: Climate change as a source of financial risk. https://www.ngfs.net/sites/default/files/medias/documents/ngfs_first_comprehensive_report_-_17042019_0.pdf
Network for Greening the Financial System. (2020). Progress report on the implementation of sustainable and responsible investment practices in central banks’ portfolio management.
Nocoń, A. (2024). Normalizacja polityki stóp procentowych współczesnych banków centralnych. Przesłanki, scenariusze i mechanizmy. C.H. Beck. (in Polish).
ONZ. (1991). Nasza wspólna przyszłość. Raport Światowej Komisji do spraw Środowiska i Rozwoju. Warszawa: PWE. (in Polish).
Phillips, T. (2023). Fed ‘will not be a climate policymaker’, says chair. https://greencentralbanking.com/2023/01/12/federal-reserve-jerome-powell-mandate/
Quorning, S. (2023). The ‘climate shift’ in central banks: How field arbitrageurs paved the way for climate stress testing. Review of International Political Economy, 31(1), 74-96 https://doi.org/10.1080/09692290.2023.2171470
Rosa, S. M. (2025). Green monetary policy measures and central bank mandates: A comparative political economy analysis. Politics and Governance, 13, 8919. https://doi.org/10.17645/pag.8919
Roy, A. (2024). Green monetary policy to combat climate change: Theory and evidence of selective credit control. Journal of Climate Finance, 6, 100035. https://doi.org/10.1016/j.jclimf.2024.100035
Sangiorgi, I., & Schopohl, L. (2021). Why Do Institutional Investors Buy Green Bonds: Evidence from a Survey of European Asset Managers. International Review of Financial Analysis, Forthcoming.
Schnabel, I. (2023). Monetary policy tightening and the green transition [Speech]. https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230110~21c89bef1b.en.html
Schoenmaker, D. (2021). Greening monetary policy. Climate Policy, 21(4), 581–592. https://doi.org/10.1080/14693062.2020.1868392
Schoenmaker, D., & van Tilburg, R. (2016). What role for financial supervisors in addressing environmental risks? Comparative Economic Studies, 58(3), 409–429. https://doi.org/10.1057/ces.2016.11
Shapoval, Y. (2024). Greening monetary policy: A conceptual framework. Scientific Bulletin of International Association of Scientists, 3(1). https://doi.org/10.56197/2786-5827/2024-3-1-1
Sveriges Riksbank. (2020). Sustainability strategy for the Riksbank [Press release]. https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=12620&context=ypfs-documents
Thiemann, M., Büttner, T., & Kessler, O. (2023). Beyond market neutrality: Central banks and the problem of climate change. Finance and Society, 9(1), 14–34. https://doi.org/10.2218/finsoc.8090
United Nations. (1987). Report of the World Commission on Environment and Development: Our common future. http://www.un-documents.net/wced-ocf.htm
van ’t Klooster, J., & van Tilburg, R. (2020). Targeting a sustainable recovery with green TLTROs. Positive Money Europe; Sustainable Finance Lab. https://sustainablefinancelab.nl/nl/targeting-a-sustainable-recovery-with-green-tltros-2/
van Lerven, F., Jourdan, S., & Bryer, N. (2020). The ECB and climate change: Outlining a vision for success. New Economics Foundation; Positive Money Europe.
Volz, U. (2017). On the role of central banks in enhancing green finance (Inquiry Working Paper 17/01). United Nations Environment Programme.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Copyright (c) 2026 Economics and Environment