Quantitative easing (QE) is a mechanism for putting new money into the economy. Central banks create money which they then use to buy bonds from investors such as banks or pension funds. This increased amount of cash in the financial system, aims to stimulate the economy by encouraging banks to make more loans and in turn increase investment.
The European Central Bank (ECB) recently agreed a new round of QE in an attempt to tackle stagnation and deflation in the Eurozone. This report argues that evidence of conventional QE in the UK has shown it to fail in its objectives and that it has simply benefited wealthy elites. It calls instead for a mechanism of Green QE and identifies how this could be implemented.
Green QE works in a similar way to conventional QE, in that a central bank creates new money to pump into the economy. The difference is that the money created in Green QE is used specifically to boost the green sectors of the economy with the aim of helping Europe transition to a sustainable economy.
We need urgently to respond to two crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. This report clearly demonstrates that implementing such a plan would help create a more stable, secure and prosperous Europe.
The report was commissioned by Molly Scott Cato MEP and is published by the Greens/EFA group in the European Parliament. It was written by Victor Anderson, Visiting Professor at the Global Sustainability Institute, Anglia Ruskin University, Cambridge.
See the press release on the launch of the report.