We are plunging into the worst recession in a century or more. Economies are in lockdown. Trade is collapsing, businesses are going bust, and with interest rates already at zero, and sometimes even less, there is not much ammunition left to fight that.
You might think running a central bank was already pretty hard right now. But, hey, there is no problem quite so bad that Greta Thunberg and her climate change friends can’t find a way to make it a little bit worse. They are accusing the central banks of turning into “climate wreckers” responsible for spewing out millions of tons of carbon into the atmosphere. But hold on. Even by the standards of the extreme wing of the environmental movement that is completely crazy. Sure, some money is going to airlines and fossil fuel companies. But that is because central banks are pumping money into the economy indiscriminately in a frantic effort to save it. If the self-appointed climate police are allowed to have their way they will bring the whole economy crashing down.
The impeccably politically correct president of the European Central Bank, Christine Lagarde, was probably a little taken aback to find her institution targeted on Twitter last week by the ferocious teenage activist Miss Thunberg.
“The last 2 months the European Central Bank has injected 7,6 billion € into fossil fuels. Allow me to doubt the seriousness of the EUs’ so called ‘green’ recovery plan,” she tweeted to her four million followers with her trademark mix of slightly wonky grammar and lethal sarcasm.
The complaint? According to an analysis by Greenpeace, from mid-March to mid-May the ECB bought more than €30bn (£27bn) of corporate bonds, of which €7.6bn were issued by oil and energy companies.
“With the purchase of bonds from just seven big polluters, the ECB contributed an estimated 11.2 million tons of carbon emissions into the atmosphere, which is more than the entire annual emissions of Luxembourg,” it argued. Cripes. It certainly sounds pretty bad.
The Bank of England is in just as much trouble. It turns out that its Covid Corporate Financing Facility, has – surprise, surprise – been accessed by companies that climate change activists don’t exactly approve of. According to Greenpeace UK “airlines have been given … billions in cheap and easy loans to keep them polluting, without any commitments to reduce emissions or even keep workers on the payroll”.
Even worse, “cruise lines, pesticides and car companies have received similar largesse”. The Bank is “bailing out climate wreckers,” according to the Green MP Caroline Lucas. To listen to some of the attacks being made on the central banks, if by some miracle we manage to recover from Covid-19 we will all be in imminent danger of dying from climate change instead.
The trouble is, Greta, Greenpeace, and the rest of the environmental movement have got the wrong end of the stick. The ECB is not giving money to fossil fuel companies. It launched an emergency blast of quantitative easing as the eurozone went into lockdown. As part of that, it bought corporate bonds, on a largely indiscriminate basis, as a way of pumping freshly printed money into the economy.
Shell, and the rest, already had the money. The ECB mostly only buys in the secondary market. At the margin, the most you could argue the Bank was doing was lowering the cost of capital for a few energy companies, but only in the sense that it is helping the entire economy by making money a bit cheaper. It isn’t helping oil companies. It is helping the economy, by injecting cash into it.