Scientists demand ECB adopt climate interest rate policy

If the ECB tightens the interest rate this Thursday, as expected, the result could stall climate action. A new study from the Bertelsmann Foundation by Alexander Kriwoluzky (DIW Berlin) and Ulrich Volz (SOAS, University of London) proposes a monetary policy that would not stall decarbonization. The fiscal dilemma: Higher interest rates lead to less investment, and result in less climate-neutral transformation of the economy. At the same time, Daniel Posch, the Foundation’s economic policy spokesman, warns that an „interest rate hammer“ would strangle the leeway of monetary policy in the long term: Because the consequences of unchecked climate change threaten the price and financial stability of the European economies.