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Another Green Whirl (ECB Remix)

European Central Bank President Christine Lagarde addresses an event to launch the private finance agenda of the 2020 United Nations Climate Change Conference in London, England, February 27, 2020. (Tolga Akmen/Pool via Reuters)

In a post last month, I noted how central banks are increasingly getting involved in climate politics. The focus of that post was Mark Carney, the former governor of the Bank of England.

Now, here’s Christine Lagarde, a character whose lack of central banking experience would not be particularly remarkable were it not for the fact that she is the (relatively) recently appointed president of, well, the European Central Bank.

The Financial Times:

Christine Lagarde, president of the European Central Bank, has opened the door to using its €2.8tn asset purchase scheme to pursue green objectives, promising to examine changes to all of its operations in the fight against climate change.

It is the first time that the ECB president has committed to examine “greener” changes to all of the central bank’s operations, including asset purchases. “I want to explore every avenue available in order to combat climate change,” she told the Financial Times in a video interview. “This is something that I hold very strongly.”

The move would make the ECB the first main central bank to use a flagship bond-buying programme to pursue green objectives.

The ECB “has to look at all the business lines and the operations in which we are engaged in order to tackle climate change, because at the end of the day, money talks”, Ms Lagarde said.

Environmental campaigners have called on the ECB to change its asset-purchase programme by selling “brown” bonds issued by carbon-intensive companies and increasing purchases of green bonds. However, critics say it is up to politicians, not central banks, to decide which companies to favour and which to penalise.

To the extent that anyone should being picking favorites other than the market (answer: they shouldn’t), the critics are right. Not for the first or the last time, “social responsibility” is being used as a way to get round democratic controls.

But Lagarde has no time for anyone who might doubt what she is up to:

Asked whether the pandemic could dilute the importance of green issues, the ECB president said that “those who would be tempted by that option would live to regret it”. She added: “I have children, I have grandchildren. I just don’t want to face those beautiful eyes, asking me and others: ‘What have you done?’”

In the perennial contest for the most nauseating use of “for the children” as a device to quash rational political debate, Lagarde may be emerging as a strong new challenger. Impressive.

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