EU climate chief says now's the time for jumbo green bond sale

[BRUSSELS] The European Union's (EU) climate chief says rising demand for green bonds creates an opportunity for the bloc, which is expected to start selling as much as 225 billion euros (S$361.95 billion) of the securities.

"If you see organisations like BlackRock making this really enormous change into the green economy, if you see them all waiting for us to come up with green bonds because they want to be part of this - I believe this is the moment to do this," said Frans Timmermans, executive vice-president of the European Commission, said on Thursday in an interview with Bloomberg TV.

His comments come as the commission prepares to offer green bonds as part of its pandemic recovery fund, in what would be a watershed moment for that part of the debt market. The amount expected is almost equivalent to all the green securities sold globally last year, likely making it the largest issuer, according to data compiled by Bloomberg.

"If we can show, as a commission, that we can handle this, that we can go on the markets, that the markets will respond to what we're doing, that this can lead to really successful investment, I think this will take off," Mr Timmermans said.

The green bonds that the commission will sell are to be jointly backed by all EU governments, in what would mark a key step in the European unification process. Proceeds will be used to help the bloc reduce and eventually eliminate its carbon emissions, making Europe the world's first climate-neutral continent.

Mr Timmermans spoke after the commission proposed a 55 per cent cut in the EU's carbon emissions by 2030 compared to 1990 levels. The current target agreed by EU member states is a 40 per cent cut, which the bloc is well on track to meet.

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The new, more ambitious goal is subject to approval by the EU's 27 national governments and the bloc's assembly. If approved, it would put the EU on track for net zero emissions by 2050.

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Meeting this objective would require a radical overhaul of the European economy, including stricter emissions caps for cars and 350 billion euros per year in investment for energy production and infrastructure. It would also mean higher costs for emitters like airlines.

"We cannot go back to the situation as it was," Mr Timmermans said, when asked about the airline industry. "They also need to take their responsibility to reduce emissions."

The battered aviation industry has to find alternative fuels and airplanes, Mr Timmermans said. "And we need to stop with the short-haul flights in Europe," he added.

Over the next nine months, the commission will propose detailed amendments to the existing EU legislation, which is binding across the bloc, to force industries and sectors to adapt to the new climate objectives. EU governments have also agreed to a 1.8 trillion euro jointly-financed recovery budget, a third of which will be earmarked for climate action.

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