The Role of the Importance of Environmental Sustainability in the Period after 2020

Posted on:Sep 8,2022


In order to avoid global warming, it has become important to follow sustainability economic policy strategy, which is an integral part of a broader environmental sustainability strategy. The two largest crises of recent times -the world crisis- have also been severely affected by the Hungarian economy, first the crown virus erupted in early 2020, and then the Ukrainian-Russian war from the beginning of 2022 towards the end of the pandemic. The latter threatens a significant portion of the world economy with severe energy and food shortages. The subject of the study is the development of public finances, with the appropriate macro-economic background to provide households and families, including small and medium-sized enterprises to ensure the functioning of the economy and the proper marketing power. The study analyses the necessary and possible ways to apply government fiscal economic policy and central bank monetary tools.

One of the most important programs of the MNB (Magyar Nemzeti Bank = Hungarian National Bank) is to ensure the financial stability of the Hungarian population, so the MNB has launched green investment programs in the area of ​​housing loans to ensure the use of energy use to reduce burden for the environment. The MNB’s lending program allows small and medium-sized enterprises to maintain and increase the level of employment, preserving and increasing the level of employment, thus ensuring and increasing their market share. Small and middle businesses can better provide higher market quality requirements with investments to be created using loans.


In order to avoid global warming, it has become important to follow sustainability as a goal, which is an integral part of a broader environmental sustainability strategy. Environmental sustainability generally focuses on preserving the activity of human society and the natural environment, which plays a role in preserving the diversity and diversity of biological wildlife, decreasing or eliminating pollution, and use of natural resources to such an extent that they can be replaced in nature, the natural resources used. On the one hand the economic sustainability focuses on environmentally friendly economic activities and, on the other hand, preserves the balance of national economies partly based on the balance of payments and partly on the basis of the balance sheet to reduce government debt. In addition to fiscal policy, monetary policy is also a part of economic sustainability, as central banks at national level have the main goal to ensure price stability to maintain financial balance.

The two largest crises of recent times -the world crisis- have also been severely affected by the Hungarian economy, first the crown virus erupted in early 2020, and then the Ukrainian-Russian war from the beginning of 2022 towards the end of the pandemic. The latter threatens a significant portion of the world economy with severe energy and food shortages. The crisis affecting the two world economies drew attention to the leaders of both the Hungarian Government and the National Bank of Hungary, that significant economic – financial steps should be taken to mitigate the negative effects of the crises. Primarily, the protection of Hungarian families and households has become fundamentally essential for a strategic point of view, partly to keep overheads and to keep the purchasing power, partly so that the Hungarian population does not pay the costs of the Ukrainian-Russian war, leaving this war. It has become important to freeze food prices and gasoline prices, which is decisive for all households and businesses to strengthen the standard of living.

The subject of the study is the evolution of public finances in order to ensure that both households and families, businesses, including small and medium-sized enterprises (SMEs) in order to secure purchasing power. The study analyses the necessary and possible ways to use the use of government fiscal economic policy and central bank monetary tools in terms of protection against the current world economic crisis. The daily topicality of the research is to monitor the effectiveness of the appropriate economic and financial defence policy to achieve strategic goals.

The study also analyses the environmental requirements for the implementation of the fiscal and monetary economic and financial strategy to be developed through green investments and green lending. In the case of the population, a loan that is designed to buy or build residential buildings in accordance with energy quality is energy efficient for the benefit of the discount, or measures taken on the following residential buildings (even worse than „BB”) (upgrading measures) one or more of executions (MNB 2020A). In addition, it is important to ensure the sustainability of growth at corporate level, as some authors pointed out: One of the most important financial objectives of enterprises in our globalized, competitive environment is value creation, namely the constant increase of the wealth of the company, which could also be defined as the determination of the sustainable level of growth (Fenyves et al., 2018).

In addition to the current price stop, which allows for reduction of inflation by up to 3-5 percent, it is advisable to investigate the role of government economic policy and central bank monetary assets to finance businesses, to provide sufficient loans, to increase their creditworthiness and to meet quality requirements. This increases the amount of employment, the purchasing power of consumers and, in parallel, reduce unemployment.

Literary background

International and domestic literature, in connection with international agreements, deals with environmental protection and environmental sustainability, taking into account the newly emerging crisis situations. The environmental load can be significantly measured by gas emissions, but not only environmental damage causes energy consumption, but also by-products generated during production are harmful material emissions. This is subject to analysis of the levels of waste hierarchy, which includes prevention; re-use; recycling; the energy supply; and the deposit.

In our opinion, the recycling of waste can reduce waste emissions, promoting the efficiency of the consumption of the material, but this is not completely eliminated. In the end, energy consumption, raw material production, processing, and consumption should combine to reduce harmful substances emissions, including waste production. Waste utilization can reduce the difficulties of the supply of raw materials to waste as well as by-products, so this circulation process can help reduce the environment.

Szentgyörgyi, Albert the Hungarian Nobel Prize winner, and the inventor of vitamin C „also drew attention. “We live in a new, cosmic world, not for that. It depends on how quickly and correctly it can adapt, whether it can transform its ideas and ideas into a social, economic and political organization. Its existence depends on whether it can adapt faster than it would be destroyed by lowly forces. His momentary position is unfavourable. We were forced to face this situation with an ancient brain; With a brain that hasn’t changed much since it developed. (Szent-Györgyi, 1974).

Population growth causes severe tensions not only in health areas, but also in food, as many developing countries have increased food needs, while the population’s purchasing power against growing world market food prices has increased. This results in further indebtedness in developing countries, as increasing financial resources are spent on food imports and not new job-creating investments. Here is the vicious circle of poor development, as Samuelson P and Nordhaus W have explained: low average income, low-level savings and investments, slow-paced capital accumulation and low-level productivity (Samuelson-Nordhaus, 1990, pp. 1161-1162).

This statement also characterizes the modest and low average income of the developing countries.

The Paris Agreement (2015) is important in connection with the need to gain environmentally conscious farming, which is a serious international attempt to achieve significant climate change measures to achieve.

A common international decision was made for this:

  • In order to nutrition of the growing population, agricultural land is expected to expand globally over the next decade to meet the increase in food demand, but at a decreasing rate. Significant growth of land is expected in the coming decades.
  • Emissions of global greenhouse gases (greenhouse gases) are expected to increase by 50%, mainly due to an increase in energy-related CO2 emissions by 70%.
  • Based on this, the environmental policy adopted by the Secretary-General in June 2013 is for the following main goals:
  • Reducing primary energy use through energy production and efficient energy use from renewable sources,
  • Ensure the efficiency of water use and the prevention of water pollution,
  • Prevent pollution creation, decrease the pollution, reusing materials to avoid more pollution,
  • Reducing gas emissions causing greenhouse effects,
  • Reducing paper consumption and use of recycled and environmentally friendly paper, as this can also achieve the safety of the workforce and families.

The Secretariat also encourages environmentally friendly mobility among its employees and visitors and the application of environmental criteria in its public procurement procedures (ET = Európa Tanács = European Council 2022).

The enhancement of environmental protection and the related green investments include human health protection, as this can achieve the safety of labour and families. However, from the beginning of 2020, the coronavirus world epidemic has created a serious world economic crisis for the last two years. The COVID-19 pandemic forced governments to take measures to save lives, such as lockdowns that restricted economic activity, which in turn increased the need for contactless financial services and products and accelerated the transition to digital financial services in many economies. The use of digital payments by some governments as a means to support vulnerable citizens, actions by central banks to encourage customers to adopt digital financial services and products, and measures to protect people’s health influenced and even continuously confirmed consumer desire for digital financial services during the pandemic (Daragmeh – Bárczi, 2021; also see more in Gherasim, 2021).

Both the pandemic crown virus epidemic and the Ukrainian-Russian war have caused serious downturns for the World Economy as a whole and thus for Hungary. The energy crisis was due to the crown virus world epidemic and the Ukrainian-Russian war, and partly by the European Union too much unilaterally dependent on fossil fuels in Russia. This incidentally raises the greater use of renewable energy carriers, which on the one hand is environmentally friendly and on the other hand, significantly reduces the dependence of Russian oil and natural gas imports for the European Union. International sources mentioned: “The energy price crisis has hit most of the European countries. In recent months the energy prices have increased 4 to 5 times, reaching even higher levels over the last days. In parallel, carbon prices have tripled since the beginning of the year. The main reasons for this situation are the financial market speculation from financial players including hedge funds and commodity trading houses, the imbalances in the gas market, seasonally decreased renewable energy production, reduced nuclear energy production, coal mine closures and increased carbon costs passed on in electricity prices. (PRESS RELEASE, 2021; Figure)”.

These growing world market prices for fossil fuels requires industrial and economic development to move towards decarbonization developments, and to provide EU direct support to Hungary and domestic producers. This is possible from the EU innovation fund. Furthermore, the efficiency of energy consumption should also be increased in both fossil and renewable energy sources. With efficient energy consumption, energy imports in Hungary can be more favourable in Hungary, resulting in the improvement of our balance of payments and ultimately a reduction in our public debt.

In the next chapter, the study analyses the possibilities of applying domestic fiscal politics and monetary tools, assessing its possible positive effects on Hungarian households, businesses and employment.

Fiscal politics and monetary assets in Hungary

In December 2011, Parliament adopted the Stability Act as a process of implementing the Fundamental Law to ensure stable sustainability of the budget, independent investigation of the central budget and promote the reduction of public debt. In this close context, the Stability Act states that „a debt -generating transaction can only be concluded only by the authorization of the law.” Further law is also the State Audit Office of 2011, according to which the State Audit Office also performs the task of state assets and public funds, based on the Fundamental Law (Domokos, 2016).

In 2013, Parliament passed a law on the Hungarian National Bank (MNB), which stated that the MNB is responsible for monetary policy, aimed at price stability and support the government’s economic policy by monetary means. Finally, the Fundamental Law authorizes the Parliament’s Budget Council to investigate the foundation of the central budget to comply with debt rules.

As a result of the NHP (Növekedési Hitel Program = Growth Credit Program) fixed construction was launched in 2019, the proportion of loans granted to KKV (kis és közép vállalkozások = small and medium-sized businesses) over 3 years again exceeded 50 percent. As a result of NHP Hajrá (Growth Credit Program Toward) from April 2020, by the end of 2021, the share of fixed-rate loans had already been close to 90 percent through new issues. Within household disbursements at the beginning of 2016, variable interest loans of more than 40 percent have now been virtually excluded from the market, to which MFL (Minősített Fogyasztóbarát Lakáshitel), namely qualified consumer-friendly home loans also contributed to the expansion of the income-based instalment index (JTM= jövedelemarányos törlesztőrészlet mutatóra) according to the interest period (MNB 2021b).

From the beginning of 2019, the MNB launched its Green Program, with which the central bank not only considered financial stability to be a fundamental goal, but also to reduce the environmental load related to climate change and to benefit carbon neutral production technology for companies. With the benefit of the development of the Hungarian Green Economy and the related investments, the risk factors caused by global warming can reduce. Products and services issued as a result of green investments serve environmental protection more than previous products and services produced by previous technology.

Based on the initial successes of the MNB’s green programs, in August 2021, Parliament passed a law that the price stability and maintenance of the MNB played a crucial role in the strategic objectives of environmental protection and sustainability. The law on the MNB has also been published in the Hungarian Gazette. For the first time, the central bank of a given country has been given such a powerful legal authorization to benefit from climate protection green programs to sustain economic development (MNB 2021d June).

The MNB extended the deadline of 2019 for the energy efficient home loans of our Hungarian credit institutions by December 31, 2024, based on its previous Green Capital Requirements Beneficial Programs strengthened by the legal authorization of the Parliament, thus further helping the population to home renovation loans. This program was announced by the MNB just before the Crown Virus epidemic period, which was definitely required after the epidemic period, with particular regard to the Ukrainian-Russian war that had begun and threatened with another global economic crisis. In the framework of the extended program, the MNB set a lower capital requirement for banks if they priced their new green home loans to their clients at least 0.3 percent cheaper during the program period. As a result of the MNB’s move, the population was able to receive loans on the basis of beneficial conditions for the purchase or renovation of housing efficiency, because domestic credit institutions had to pay 0.3 percentage points for these green loans by 0.3 percentage points (MNB 2020B July).

Towards the end, the crown virus epidemic and the recently erupted Ukrainian-Russian war have made the domestic population and the Hungarian banking system a major challenge, which resulted in retail housing investments to be questioned or later to implement these investments. Therefore, it may have been that the central bank, the Sustainability Development Strategy, expanded its Green Program in time, taking into account its environmental burden goals, which resulted in more flexible and affordable credit conditions for the population.

In addition to providing retail energy-efficient home loans, the MNB also expanded the program of corporate and municipal green capital requirements launched in 2019. Due to the environmental difficulties of climate change and the resulting environmental difficulties, this program also requires the need to carry out the technology reduction of the environmental burden on investments. This technological change made it necessary for the most environmentally friendly and sustainable sectors – that is, green – sectors to share as much as possible from bank loans launched by the MNB and provided through credit institutions.

To this end, the MNB intends to improve the risk profile of the banking sector and encourage green lending through a positive incentive to release part or entire part of the capital requirement rules for the annual capital requirement of the environmentally sustainable corporate and municipal exposures in the detailed 2nd pillar, as criteria. The discount, which is provided by the MNB for five years, first step in the financing of renewable energy production and the purchase of green bonds by banks (MNB 2021c March).

Note: According to the authors, the examination of the impact of the new Basel Capital Requirement Rules on financial stability should not be narrowed to assess the technical rules of pillar 1st. The 2nd pillar, which determines information on the operation, control and behaviour of the financial system, is of similar importance to the functioning, hazarding and behaviour of the financial system for the 2nd pillar and market information-rule declared determined by the 3rd pillar for the public (Mérő et al., October 2003).

The MNB’s Green Program, under the legal authorization of Parliament, is increasingly extended to other economic sectors on the basis of the energy efficiency strategy than the agriculture and the sustainable – green transport system that permeates the entire economic system and the situation of the domestic population. In parallel, the MNB has developed a national sustainable capital market strategy document with the support of the European Commission and the EBRD (European Bank for Reconstruction and Development), with several other government institutions and the BÉT (Budapesti Értéktőzsde = Budapest Stock Exchange).

Based on the amendment to the MNB Act, from 2022, the central bank can use 6 percent of fines to be neutralized. To this end, this cost is gradually reduced as the MNB promises to reduce its carbon dioxide emissions by 30 percent within 3 years and by 80 percent by 2025. In addition, the MNB has previously entirely used the ecological footprint to complex a marshland habitat in Páparateszér. In this context, the central bank has launched further habitat development projects, which will absorb the entire carbon footprint in the near future. The financing of the installation of 27 hectares of oak forest near Geszt, located in the Körös-Maros National Park, also serves this purpose (MNB 2021d June).

It is important that businesses also have appropriate financial reserves to manage their risk, the finance-focused valuation practice in the present days regarding the influence of the macroeconomic conditions of the system on the business value. Economic fluctuation affects business value through the risk premiums, that is why, there is a raison d’être for models that blend economic and financial approaches (Almási – Zéman, 2019). In addition, the authors also point out that businesses always have ready information: the investigated companies presented proportionally less information in the general part of the notes to the financial statements as compared to the informative part (Fenyves et al 2018; see in detailed in Zéman, 2019), see especially the Chinese example (He et al., 2021).

The MNB has drawn attention-with special regard to the rise in the last significant price of gas oil and gas and the price-rising effects of the Ukrainian-Russian war- to improve the competitiveness of SMEs, which required the quality requirements for SMEs the disbursement of loans paid for them on more favourable conditions. At the same time as providing favourable credit conditions, the central bank also made quality requirements for SMEs. SMEs, as with other businesses, require environmental regulations by the MNB when disbursed loans when they are created. The MNB acts similarly when providing retail loans, because in the case of home purchase or home renovation, the retail borrower must acquire environmentally friendly renewable energy sources.

Summary, conclusions

In addition to their financial subsidies and access to loans, the proper crisis is needed to deal with management oriented economic steps to overcome possible future crisis situations, especially as a result of the recent significant world market price and the cost increase of the Ukrainian-Russian war. In addition, they must perform their economic and production service at a good quality level based on the use of environmentally friendly carbon-neutral technology, as they can remain competitive in the domestic and international markets and get the right price revenue to ensure their future investments. Corporate revenue can only ensure the salary of employees and their purchasing power accordingly. With these corporate conditions, companies can provide the domestic markets with sufficient quality products and services, as well as workforce, which requires a possible lead in crisis. This requires the development of a crisis management at the level.

Further green seats of financial markets, taking into account the environmental protection and sustainable economic model and competitiveness, are predicting the further expansion of these instruments to the government and the MNB in the coming years. The MNB’s commitment is shown by the fact that its activities have been added to a green mandate from 2 August 2021, the first of the European central banks. Thus, the MNB continues its efforts to move the domestic financial system and thus to convert the entire economy to carbon-neutral climate-friendly career (MNB 2021b, 2021e). There is a need to develop the MNB’s green programs in the future, as there is still a demand at both the residential and the company level. Future innovation developments are needed in the world economy, in addition to possible global economic crisis, and thus for companies for SMEs, as this is a prerequisite for staying in domestic and felt markets, further financial subsidies and lending.


A study was supported by the Széll Kálmán Public Finance Lab at the National University of Public Service, Budapest, Hungary


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Prof. Dr. Csaba Lentner Head of Lab,
National University of Public Service Kálmán Széll Public Finance Lab, Hungary

Dr. Zsolt Horbulak University Lecturer,
University of Economics in Bratislava, Slovakia

Dr. habil Sándor Zsarnóczai J. Senior Research
National Public Service University Széll Kálmán Public Finance Lab,