Macron urged to push for dual interest rates at EU level

January 5, 2024|Written by |European Central Bank

A group of climate organisations has asked French president Emmanuel Macron to advocate for the adoption of dual interest rates at the EU level after he spoke in favor of differential rates at Cop28 in December.

“The current one-size-fits-all interest rate model is untenable,” the group of six academics and 17 NGOs said in an open letter to Macron.

The advocates said a dual interest rate environment would allow central banks to align their policies with the transition to a green economy while managing inflation. Research from the European Central Bank (ECB) found that the longer the transition to a green economy takes, the more damage it will cause the economy. However, today’s current rate environment has drastically increased the cost of renewable energy.

“France has the opportunity to lead the discussion on dual interest rates that would encourage financial institutions to favour green projects, such as renewable energy investments and energy-efficient home renovations, over environmentally harmful ones,” the letter said.

To implement a dual interest rate properly, there needs to be strong oversight and accountability, the group said. This means ensuring a clear alignment of the environmental objectives of the EU and oversight from the European parliament. In addition, data and supervision are needed to avoid greenwashing and make sure that lending goes “towards activities that are truly green, such as helping people to renovate their homes”.

At Cop28, Macron endorsed the concept of different interest rates for green energy and energy from fossil fuels, calling it “absurd” that there are few incentives for green finance. He reiterated his comments in an article for French newspaper Le Monde in late December, calling for more private financing.

“The cost of investment must be higher for players in the fossil-fuel sector. We need a green interest rate and a brown interest rate,” he wrote.

Conditions must also be created to help vulnerable countries finance climate-change mitigation and access green technologies, which means pursuing “an unorthodox fiscal and monetary policy”, Macron said.

This page was last updated January 8, 2024

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