A European climate bond

SUMMARY

Europe faces a large climate investment gap. To fill this gap, we propose the joint issuance of European climate bonds. These bonds would be funded by selling greenhouse gas emission allowances through the Emissions Trading System, extended to cover all sectors. Access to the resulting funds would be conditional on countries’ performance in implementing climate projects. European climate bonds would meet the demand for a safe, liquid and green asset, while accelerating climate investment, increasing its resilience to sovereign crises and the greening of both investors’ portfolios and monetary policy.