For several years, and even more today in the context of the Covid-19 crisis, the European Central Bank massively uses quantitative easing to fulfill its missions. With the Eurosystem banks, it held 2783 billion euros in assets at the end of March 2020 and plans on buying 1700 billion in 2020-2021.

These billions should go to the construction of a resilient, united and sustainable Europe. However, available information shows that the ECB’s corporate asset purchases massively finances the most polluting sectors. Beyond the automobile or air sector, fossil fuels – and even the most harmful ones like coal and shale oil and gas – largely benefit from these purchases.

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The ECB’s high-carbon tool

While the UE’s objectives are to reach carbon neutrality by 2050 and to reduce carbon emissions by at least 40% by 2030, 63% of the ECB’s corporate asset purchases go to high-carbon emitters.

By following the principle of market neutrality, the ECB hopes to avoid influencing the market by mimicking its structure and composition. In fact, the ECB buys assets of big corporations from every sector, including high-carbon transports like the air or fossil fuel sectors.

This principle is a hoax: the ECB’s portfolio is mainly composed of carbon-intensive assets, more exposed to fossil fuels and less to low-carbon transport than the market. Quantitative easing is neither neutral nor aligned with the European climate objectives. On the contrary, it is in conflict with European goals and targets.

The ECB supports fossil fuel expansion

The ECB’s corporate asset purchases finance 38 corporations from the fossil fuel sector.

Light years away from a 1.5°C or 2°C trajectory, these companies contribute to the expansion of fossil fuels. In July 2020, they were planning 62 new fossil gas projects all over the world – including 35 LNG projects -, thus greatly contributing to fossil gas development.

Shell and Total are especially problematic: they plan on increasing their oil and gas production respectively by 38% and 12% from 2018 to 2030 and propose 36 new gas projects. Shell is also one of the 4 enterprises of the ECB’s portfolio active in shale oil and gas and could multiply its production in the area by 12.

Globally, the ECB’s asset purchases largely benefit to gas and finance its European expansion. They don’t acknowledge the necessity to phase out all fossil fuels nor the climate impact of gas, worsened by methane spills or the energy intensive liquefaction process.

European quantitative easing is not close to a coal exit, far from it.

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Still no coal phase-out for the ECB?

The ECB buys assets from 10 companies active in coal for a total installed power of about 66 000 MW, more than all French nuclear reactors. Among them are 3 companies highly exposed to coal and/or in the process of developing new coal capacity.

For example, Enel, which was recently included by the Norwegian Pension Fund in the list of companies under observation – the first step before being excluded from all investments by one of the biggest pension fund worldwide, beneficiates of the QE.

We can also find Fortum among the beneficiaries of the ECB’s asset purchases. Fortum is the majority shareholder of Uniper which is also listed on the list of companies under observation by the Norwegian Pension Fund because of its coal-related activities. Uniper is developing a new coal power plant in Germany and is suing the Netherlands to oppose their decision to exit coal by 2030.

Europe should exit coal by 2030, but only one of the 10 coal companies that beneficiate of the QE is expected to get out of the sector by then. None of these 10 has adopted an asset-based coal exit plan. Like Engie, most of them only close coal plants that fall under national exit plans. They continue to run coal plants in other countries, especially outside Europe, with no plans to close most of them by Paris aligned deadlines. Moreover, they often chose to sell or convert – and not close – their assets.

The lack of coal exclusion by the ECB is as unacceptable as puzzling. The European Investment Bank and the European Bank for Reconstruction and Development as well as more than 120 private financial institutions have adopted policies to restrict their support to the coal sector and a growing number of them are aligning their financial services with a coal exit trajectory.

The ECB must immediately exclude
the most polluting assets

To align with European climate objectives, the ECB must start by excluding from its list of eligible assets those corporations:

  • That do not adopt, by 2021, a detailed plan to phase out coal by 2030 in Europe and the OECD and by 2040 worldwide. By 2022, they should adopt a similar plan to phase out oil and gas by 2040/2050.
  • With high exposure to coal or unconventional oil and gas.
  • That develop new fossil fuel projects.

To contribute to the emergence of sustainable finance and a sustainable economy, the ECB should:

  • Push for a “brown” taxonomy that, together with the “green” taxonomy, will allow it to target green sectors and low-carbon activities with its asset purchases.
  • Exclude from its list of eligible assets those corporations that do not adopt an alignment plan on a 1.5°C trajectory.

In a context of massive quantitative easing use, recommended exclusions must be implemented immediately. Without them, the asset purchases decided in response to the Covid-19 pandemic alone could finance high-carbon emitters to up to 220 billion, therefore crushing hopes for a “green recovery”.

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