Greening Monetary Policy

Climate Policy, 21(4), 581-592.

22 Pages Posted: 19 Sep 2018 Last revised: 29 Mar 2021

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 26, 2021


While there is increasing interest in decarbonising or greening monetary policy, central banks are keen to maintain market neutrality. However, there is evidence that the market has a bias towards carbon-intensive companies. The paper develops a method to tilt the European Central Bank’s (ECB) asset and collateral framework towards low-carbon assets. We find that a medium tilting approach reduces carbon emissions in the ECB’s corporate and bank bond portfolio by over 50%. We show that a low carbon allocation can be done without undue interference with the transmission mechanism of monetary policy.

Keywords: Monetary Policy, Collateral, Decarbonising, Carbon Emissions, Cost of Capital

JEL Classification: E52, E58, Q01, Q52, Q54

Suggested Citation

Schoenmaker, Dirk, Greening Monetary Policy (March 26, 2021). Climate Policy, 21(4), 581-592., Available at SSRN: or

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam


Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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