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Abstract:
To achieve the goals of the Paris Agreement, massive investments in the real economy are needed. We propose providing long-term interest subsidized loans to companies investing in sustainable projects with the primary goal of greenhouse gas neutrality. In detail, we propose linking loan interest rates to the EU Taxonomy and to future CO2 prices. These links incentivize companies to decarbonize. Furthermore, this link can hedge companies against volatile CO2 prices and incentivizes companies to make their business models more sustainable. Both elements support the transformation process of the economy.
