In Defence of Borrowing for Climate Action

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Publication Date October 2022
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Member-states have not taken up almost over €200 billion in cheap loans under the Recovery and Resilience Facility (RRF, a funding instrument that makes up most of NextGenEU). Under the RepowerEU plan, these funds will be repurposed for energy investment. One reason that member-states have not taken them up is that they would be added to their debt-GDP ratios. But if the money created assets with sufficient revenue streams, government bond markets would be sanguine about it. The other reason is that borrowing costs have been low for European governments until recently; they have not needed to turn to the EU for cheaper loans. With the Federal Reserve tightening global monetary conditions, yields are rising for countries that are fiscally weaker, and EU loans are becoming more attractive. Cutting emissions is a collective European interest, and the more cheaply and quickly, the better. So is being less dependent on autocratic governments for fossil fuels. Borrowing is a helpful instrument to achieve both objectives

Source Link Link to Main Source https://www.cer.eu/insights/defence-borrowing-climate-action
Alternative sources
  • https://www.cer.eu/sites/default/files/insight_JS_12.10.22.pdf
Related Links
ESO Records
OJ L 243: July 9th 2021: Regulation (EU) 2021/1119 establishing the framework for achieving climate neutrality (‘European Climate Law’) https://www.europeansources.info/record/proposal-for-a-regulation-establishing-the-framework-for-achieving-climate-neutrality-european-climate-law/
European Commission: COM (2022) 230: REPowerEU Plan https://www.europeansources.info/record/repowereu-plan/

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