Objectives:
The study aims to examine how green monetary policy can support the energy transition in the European Union (EU) while maintaining price stability. Specifically, it investigates the relationship between monetary policy instruments, particularly interest rates and pro-ecological investment, inflation, and carbon dioxide emissions.

Material and methods:
The research utilized both literature analysis and econometric modeling. Panel data for 27 EU member states covering the period 2015–2022 were obtained from Eurostat. The empirical analysis employed a Vector Error Correction Model (VECM) to assess the long-run and short-run relationships among variables including GDP, inflation (CPI), long-term interest rates, green investment, and CO₂ emissions.

Results:
The results indicate that an increase in long-term interest rates leads to a decline in green investment and, consequently, to higher carbon dioxide emissions. Inflation also exerts a negative effect on ecological transformation by constraining financial capacity for green projects. The impulse response analysis showed that a one-unit increase in interest rates causes a gradual rise in CO₂ emissions over a seven-year horizon, while variance decomposition revealed that approximately 50% of CO₂ emission changes can be explained by interest rate fluctuations.

Conclusions:
Monetary policy can play a critical role in the EU’s energy transition by facilitating cheaper financing for green investments through lower interest rates. Integrating environmental objectives into central bank strategies can promote sustainable growth and mitigate climate-related inflationary risks. Green monetary policy, when effectively designed, can thus reconcile price stability with environmental sustainability, strengthening the EU’s resilience to climate and energy shocks.