In this article, the author explores an innovative solution based on the intervention of the European Central Bank (ECB) and the European Investment Bank (EIB), in order to sustainably support the energy transition without increasing public debt.

The role of the ECB and the EIB in financing the ecological transition

Financing the massive expenditures required to accelerate the ecological and energy transition while simultaneously reducing the deficit is an impossible mission. Only an alternative approach, jointly decided upon by member states at the European level and in conjunction with European institutions, could help France.

European fiscal and monetary policies have already addressed crucial challenges, such as the 2021 post-Covid European recovery plan (€750 billion supplemented by a multiannual budget of €1 trillion for the years 2021-2027). Why not use this mechanism to finance the acceleration of the ecological and energy transition, as well as reindustrialization in Europe, and thus significantly reduce our energy and industrial dependence?

A new European pact enabling the financing – without increasing public debt – of a vast investment plan seems more opportune than ever. This is what the United States did during the Covid pandemic and what they did again more recently with the Inflation Reduction Act of 2022.

Without increasing the volume of money created by the European Central Bank and with inflation in the Eurozone stabilized below 2% per year, the plan would be for the ECB to massively purchase "green" bonds issued by the European Investment Bank (EIB). This mechanism would allow the EIB to significantly increase its capacity to finance dedicated projects over the next ten to twenty years. As a result, the ECB's total balance sheet could be stabilized at around 40% of the Eurozone's GDP, a level equivalent to that of central banks in most Anglo-Saxon countries.

The issuance of green bonds by the EIB would not increase public debt (contracted by states) but rather increase the latter's financing capacity, either directly or through its dedicated investment funds.
As was done for the rescue of European commercial banks (2014-2019), the expenditures related to this new European investment plan would be substantially refinanced :

  • Indirectly, through upstream monetary creation, the ECB massively purchases green bonds issued by the EIB on the secondary market;
    and
  • directly, through downstream equity injections, the EIB providing – directly or through dedicated funds – equity or quasi-equity to companies undertaking projects eligible for financing.

To do this, the ECB could reinvest the sums that are gradually repaid to it by its debtors (200 to 250 billion euros per year) by purchasing new securities, which would be green bonds issued by the EIB to finance investment projects related to the ecological and energy transition.

Thus, the flows of monetary creation (generated over the last 10 years) would be redirected towards investment projects linked to the ecological and energy transition, which would allow for regaining room for maneuver in terms of economic sovereignty, employment and sustainable growth.

This new “Marshall Plan” for accelerating the ecological transition could also be partially dedicated to co-financing the construction of infrastructure necessary for the sustainable development of Africa within the framework of international partnerships, without the expense being borne by the French or European taxpayer.

But this mixed financing can only be implemented if national and European political authorities can agree, within the framework of a technical reform of the Treaties, on the necessary extension of the missions that will be entrusted to both the ECB and the EIB.

This change should be coupled with an increase in the EIB's share capital, enabling it to increase the total outstanding amount of loans and guarantees granted by the Bank to more than 3 trillion euros and to allow the EIB to take stakes in companies, either directly or through dedicated funds.

Faced with classical monetary orthodoxy, why not open up the field of possibilities today and finally proceed with the essential renovation of the European pact and our economic paradigms in order to be able to face the major challenges of the 21st century?

Article published on 18/11/2024 in Les Echos (archived version)