Green refinancing operations could help shield Europe from fossil fuel price shocks and stabilise inflation, finds a new WWF study.
By offering preferential rates to commercial banks for financing Taxonomy-aligned projects such as renewable power, upgraded energy grids, energy-efficient buildings, and sustainable transport, the European Central Bank (ECB) can strengthen price stability and accelerate the energy transition.
“Aligning monetary policy with climate goals is a win-win, for both the climate and the economy,” said Dominyka Nachajute, Sustainable Finance Policy Officer at WWF European Policy Office. “A delayed transition prolongs Europe’s vulnerability to climateflation, price pressures driven by climate impacts, and fossilflation, inflationary shocks caused by fossil fuel volatility, undermining both environmental and economic resilience.”
Based on data from 47 Eurozone banks, the study finds that green refinancing operations could be implemented immediately, with at least €10 billion annually in green lending already eligible today. With banks increasingly familiar with EU Taxonomy disclosures, past barriers are falling, creating a clear window for the ECB to act and strengthen Europe’s economic resilience and energy independence.
WWF calls on the ECB to design a green interest rate feature, based on the EU Taxonomy, within the new structural refinancing operations foreseen under its forthcoming operational framework. This would ensure monetary policy recognises the central role of the green transition in delivering long-term price stability. In parallel, the European Commission needs to reinforce Taxonomy disclosure and usability to provide the granular, verifiable data needed for implementation and credibility.
“Green refinancing operations are fully compatible with the ECB’s price stability mandate and build on its long-standing experience with refinancing tools. The ECB already has the expertise, operational frameworks, and data infrastructure to design this instrument, and with the EU Taxonomy providing clear eligibility criteria, all the prerequisites are in place for decisive action that supports price stability and contributes to the EU’s climate and energy objectives”, said the author of the study, Stanislas Jourdan, associate fellow at the New Economics Foundation and Sustainable Finance Lab.
The report urges swift coordination between the ECB, the European Commission and the European Banking Authority to overcome remaining barriers and unlock the full potential of green refinancing operations, an essential step to secure Europe’s price stability and climate objectives.
