finance
European Central Bank Keeps Higher Interest Rate Despite Green Investment Needs
The ECB raised its benchmark rate to 2.25 percent in June and is expected to hold it steady at its July 23 meeting. Officials have not adopted a lower rate for green projects, even as record heatwaves and higher oil prices followed recent energy shocks.
Jul 20, 9:16 PM·1m read1 source
Le MondeAudio version
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The European Central Bank raised its main interest rate from 2 percent to 2.25 percent in June to address inflation that followed higher oil prices. Officials are scheduled to leave the rate unchanged at their July 23 meeting, though another increase remains possible in September.
Record heatwaves across Europe this year have been linked to climate change. Dependence on oil also increased costs after prices rose following attacks on Iran at the end of February.
Significant investment is required for renewable energy, industrial changes, and agricultural shifts to reduce emissions and oil reliance. Higher interest rates increase the cost of these projects. A March study by economists at Maastricht and Utrecht universities found that a 0.25-point rate increase between 2001 and 2024 cut new onshore wind capacity by 3.2 percent and solar capacity by 5.3 percent.
Fossil fuel, hydropower, and nuclear projects showed no similar reduction. China's central bank offers low-cost funding for green investments. The ECB has not adopted a comparable tool.
