A disorderly or incomplete transition to net zero carbon emissions poses a major risk to the global financial system, European Central Bank (ECB) chief economist Philip Lane has said.
“Globally and country by country, if we have clear and steady transition plans between now and 2030...then the implications at a macro level are relatively low,” he told the Dublin Climate Dialogues conference.
“A lot can happen, the world can adapt, markets can reallocate, sectors can adjust...it’s a big programme of work but we can get through that work,” he said.
However, if the transition is delayed or incomplete “it means that we’re storing up a bigger adjustment for later on...then it becomes more of a macro risk factor,” Prof Lane said.
Gap
He hinted there was a gap between government pledges on climate and action.
“We would very much favour the conversion of a lot of the announcements we’ve seen in recent years into actual rollout policies,” he said.
While the Irish Government has pledged to reduce emissions by 7 per cent a year it has yet to announce the carbon budgets for each of the economic sectors.
“We need to move identifying the need to have a transition to actually implementing,” he said.
Prof Lane said the financial sector has a lot of work to do in terms of rellocating capital to the sectors that need to expand.
“Having comprehensive year-by-year transition policies would be highly desirable,” he said.
Prof Lane said increasingly central banks were embedding climate risk issues into their financial stability assessments and supervision.
Earlier the conference heard from Prof Jim McDonald, principal of the University of Strathclyde, who talked about electrifying transport and other systems.
He said the demand for eletricity would be two to tree times what it is now if the transition if successfully achieved.
And this would require a major expansion of the electricity grids, one which takes in a range of renewable energies, including off-shore wind generation, now one of the big growth areas, he said.
