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Published on Monday, September 20, 2021

Europe | Sustainable and efficient financing

The European Union has announced that it will issue up to 250 billion euros in green bonds over five years to fund "Next Generation EU" projects with a positive environmental impact.

Key points

  • Key points:
  • This figure, about 0.3% of GDP per annum for five years, would partly cover investment needs for the climate transition that Bruegel analysts place at 0.5 to 1% of the EU's GDP.
  • Demand from investors is not translating into a lower cost of capital for sustainable projects, however.
  • Moreover, it is unclear whether green asset placements help lower the intensity of carbon emissions.
  • A comprehensive climate policy package, organized around credible long-term carbon pricing, is essential to send signals for green project investment and financing.
  • But rather than setting quotas or overall objectives, it would be best to start with a clear, permanent and comprehensive definition (common to different jurisdictions, as is the availability of financial flows) of what counts as "green".

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