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Policy Contribution

Accounting for climate policies in Europe’s sovereign debt market

Sovereign debt will be vital in stimulating sustainable investment, but information is lacking on how green public spending actually is.

By: and Date: May 3, 2021 Topic: Banking and capital markets

The authors are grateful for very helpful comments from Moritz Krämer, Patrice Cochelin and Paul Munday in the context of a related project, undertaken with Stavros Zenios.

International debt investors increasingly demand assets that are aligned with environmental, social and governance objectives. Sovereign debt is being belatedly swept up in this change. This huge asset class represents a uniquely long-term claim and funds a wide range of public expenditure, both brown and green. Public capital expenditures will be a central part of the roughly €3 trillion investment budget needed to pay for the European Green Deal.

European Union countries have so far met investor appetite for climate-aligned assets through sovereign green bonds, the issuance of which has rapidly grown since 2017. The EU itself will also issue green bonds in large volumes. However, because of some inherent flaws in such instruments and as their still-weak frameworks, these bonds are unlikely to meet the environmental criteria demanded by investors, and will complicate established principles in sovereign debt management.

Much more comprehensive information is needed on the climate related aspects of the public budgets of EU countries. Greater transparency in this respect would support stability and improve the functioning of capital markets, given that sovereign debt plays a pivotal role in all investor portfolios and also in regulatory and monetary policy.

Adoption by sovereign issuers of green budgeting principles, based on a common taxonomy of sustainable activities, would enhance transparency. It could also be driven by investors who, under new EU rules, must disclose the climate-related aspects of all financial instruments offered in the capital market.

Recommended citation:
Domínguez-Jiménez, M. and A. Lehmann (2021) ‘Accounting for climate policies in Europe’s sovereign debt market’, Policy Contribution 10/2021, Bruegel

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Policy Contribution

How can the European Union adapt to climate change?

A stronger adaptation governance framework would benefit adaptation efforts.

By: Klaas Lenaerts, Simone Tagliapietra and Guntram B. Wolff Topic: Green economy Date: June 28, 2022
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Upcoming Event

Jul
6
12:30

Shifting taxes in order to achieve green goals

How could shifting the tax burden from labour to pollution and resources help the EU reach its climate goals?

Speakers: Heather Grabbe, Femke Groothuis, Carola Maggiulli, Niclas Poitiers and Kinga Tchorzewska Topic: Green economy, Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
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Upcoming Event

Jul
5
12:30

Green public investment after COVID-19

How can the public sector meet the climate funding needs of the EU?

Speakers: Zsolt Darvas and Elena Flores Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
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External Publication

The Global Quest for Green Growth: An Economic Policy Perspective

A review on green growth and degrowth arguments.

By: Klaas Lenaerts, Simone Tagliapietra and Guntram B. Wolff Topic: Global economy and trade, Green economy Date: May 5, 2022
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External Publication

European governance

Green public procurement: A neglected tool in the European Green Deal toolbox?

A new EU regulatory action in public procurement could unlock the potential of green public procurement and add an important element to the European Green Deal toolbox.

By: André Sapir, Tom Schraepen and Simone Tagliapietra Topic: European governance, Green economy Date: April 26, 2022
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Blog Post

Owning up to sustainability risks: the EU should champion international standards

To keep European Union capital markets open and integrated, new international standards should be reflected in future European law and accounting practice to provide further incentives for a reallocation of capital, reflecting in particular climate risks.

By: Alexander Lehmann Topic: Banking and capital markets, Green economy Date: April 26, 2022
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Climate migration: what do we really know?

While uncertain, studies suggest that climate change will cause significant internal and international migration over the next century.

By: Klaas Lenaerts and Simone Tagliapietra Topic: Global economy and trade Date: April 25, 2022
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External Publication

Dans l’urgence climatique

Book published by Gallimard and overseen by Groupe d’études géopolitiques (GEG)

By: Simone Tagliapietra Topic: Green economy Date: March 22, 2022
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Past Event

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Decarbonising Germany: conversation with Patrick Graichen

A special off-the-record conversation with Patrick Graichen.

Speakers: Patrick Graichen and Guntram B. Wolff Topic: Green economy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 10, 2022
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Past Event

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Greening Europe’s post-Covid-19 recovery

At this event Bruegel launches a new Blueprint that collects voices of policymakers and academics on the crucial topic of how to make sure Europe will recover from the pandemic crisis while keeping their commitments to the Paris Agreement.

Speakers: Ian Parry, Simone Tagliapietra, Laurence Tubiana and Guntram B. Wolff Topic: Green economy Date: February 24, 2022
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Blueprint

European governance

Greening Europe’s post-COVID-19 recovery

This Blueprint includes some of the Group’s most prominent voices on the different aspects of the multidimensional issue of green recovery.

By: Simone Tagliapietra, Guntram B. Wolff, Georg Zachmann, Laurence Tubiana, Laurence Boone, Antoine Dechezleprêtre, Jean Pisani-Ferry, Klaas Lenaerts, Thomas Wieser, Ottmar Edenhofer, Mirjam Kosch, Michael Pahle, Ian Parry, Robert N. Stavins, Sabine Mauderer and Tomasz Koźluk Topic: European governance Date: February 23, 2022
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Europe’s sustainable taxonomy is a sideshow

The EU taxonomy grossly simplifies a complex and dynamic world. It might help prevent green-washing but other tools are needed to guide green investment.

By: Georg Zachmann Topic: Green economy Date: February 22, 2022
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