Discussion paper

DP18988 A European Climate Bond

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


Monasterolo, I, A Pacelli, M Pagano and C Russo (2024), ‘DP18988 A European Climate Bond‘, CEPR Discussion Paper No. 18988. CEPR Press, Paris & London. https://cepr.org/publications/dp18988