The Monetary Policy Committee’s incoming member Megan Greene has talked up the prospect of using preferential interest rates to encourage banks to make green investments – angering conservative groups.
Greene, who is set to join the Bank of England’s rate-setting committee on July 5, said central banks need to “go further” to combat climate change, arguing that banks could be handed “preferential (negative) rates” if they direct the funds towards green investments”.
Greene is an American economist who is global chief economist at Kroll Inc, a US investigation and risk consulting firm.
Her comments prompted net zero sceptic group Net Zero Watch to call on MPs to ‘reject’ her appointment, arguing that the Bank would breach its fiduciary duties to adopt a policy favouring green investments.
The Telegraph also ran a critical piece about her appointment, with former Cabinet minister Lord Frost telling the Sunday Telegraph that such a “collectivist” and “socialist approach” was troubling.
In response to the Telegraph piece economist Lukasz Krebel of the think tank New Economics Foundation defended Greene on twitter, labelling The Telegraph article a “weak & misguided piece… with mean words but little substance”.
As Krebel pointed out, Japan’s central bank already has a green lending scheme, which offers zero interest loans that can be rolled until 2030 to banks that boost green or sustainable finance.
He added: “The UK is facing significant challenges of low growth and low business investment, which suffered from Brexit uncertainty & new trade barriers, Covid pandemic, and now interest rate hikes.
“A ‘dual rates’ approach… offers a solution: a lower rate for productive & urgently needed green investments (which are capital-intense & more exposed to rate hikes) with tighter policy as required otherwise.
“Lastly, dual rates would strengthen the BoE’s ability to deliver price and financial stability. A scheme targeted at energy efficiency & clean energy would reduce UK exposure to future fossil-driven inflation & help mitigate climate-related risks
“UK government has just had to spend £52bn (net) in 1 FY (2022-23) on Energy Price Guarantee & cost of living payments as the fossil fuel price shock hit the UK hard. Measures such as ‘dual rates’ which will help speed up decarbonisation, are simply common sense.”
A number of UK banks and building societies already offer green mortgage products, which tend to offer slightly better rates for customers with energy efficient properties.
