Green interest rates could be used to make retrofitting homes more affordable. Photo: Bill Mead
The European Central Bank (ECB) should consider introducing a preferential “green” interest rate to promote investment in the transition to net zero, according to a new report by environmental group WWF.
“Aligning monetary policy with climate goals is a win-win, for both the climate and the economy,” said Dominyka Nachajute, sustainable finance policy officer at WWF European Policy Office, noting that delaying the energy transition meant Europe would be more vulnerable to inflationary shocks caused by volatile fossil fuel prices.
Climate advocates have long pushed the idea of a dual interest rate for green financing, especially as rate rises to combat inflation in recent years have increased the costs of renewables, which have higher upfront costs.
French president Emmanuel Macron has said it is “absurd” that there are few incentives for green financing and pushed for a dual interest rate. However, some central bankers say the idea of dual interest rates should be seen as a fiscal tool rather than being part of monetary policy.
The ECB said in July that it is committed to considering the implications of climate change and nature degradation in its monetary policy in its latest strategy.
The ECB said it will adapt its tools and market operations in relation to disclosures, risk assessment, corporate sector asset purchases, and its collateral framework. In addition, the central bank aims “to incorporate climate-related considerations into the structural monetary policy operations to be introduced at a later stage”.
WWF called on the ECB to design a green interest rate feature within the new structural refinancing operations foreseen under its forthcoming operational framework.
Major central banks like the ECB, Federal Reserve and Bank of England already have the tools in place that could enable dual interest rates, with many advocates pushing for lower rates for projects like financing greener homes. ECB executive board members Isabel Schnabel and Frank Elderson have spoken in favour of dual rates, although Elderson has cautioned that a lack of data to validate green labels would make this too challenging for the central bank.
The WWF said the new interest rate could be offered to projects aligned with the EU taxonomy – a classification system that defines criteria for economic activities aligned with the net zero transition.
The ECB could offer preferential rates to commercial banks in areas like renewable power, upgraded energy grids, energy-efficient buildings and sustainable transport, the WWF report said.
“Green refinancing operations are fully compatible with the ECB’s price stability mandate and build on its long-standing experience with refinancing tools,” said Stanislas Jourdan, associate fellow at the New Economics Foundation and Sustainable Finance Lab and author of the WWF study.
“With the EU taxonomy providing clear eligibility criteria, all the prerequisites are in place for decisive action that supports price stability and contributes to the EU’s climate and energy objectives,” he said.
WWF called for rapid coordination between the ECB, the European Commission and the European Banking Authority to overcome any remaining barriers to the idea.
The study found green refinancing operations could be implemented immediately, with at least €10bn annually in green lending already eligible, according to data WWF collected from 47 eurozone banks.
“With banks increasingly familiar with EU taxonomy disclosures, past barriers are falling, creating a clear window for the ECB to act and strengthen Europe’s economic resilience and energy independence,” the report said.
This page was last updated December 9, 2025
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
