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Article

Greening Monetary Policy

Central banks have recently become aware of the economic and financial risks associated with
uncontrolled global warming and have begun to mobilize. But until now, monetary policy, which is at
the heart of their missions, has not been integrated into the fight against global warming. The purpose
of this article is to show that it is possible to green monetary policy without jeopardizing a central
bank's primary mission, macroeconomic stabilization and inflation control. The operational framework
within which monetary policy is conducted can be modified to encourage commercial banks to adjust
their crediting policies according to the associated CO2 emissions. Two options are presented. One
involves adding a climate premium to the bank's specific key interest rate and climate rating for its
credits, the other involves differentiating the treatment of counterparties to the liquidity offered by the
central bank according to the associated CO2 emissions. The implementation of these measures is
discussed, in particular their compatibility with the macroeconomic stabilisation objectives of monetary
policy.