Yannis Stournaras: Climate change - threats, challenges, solutions
for Greece
Keynote address by Mr Yannis Stournaras, Governor of the Bank of Greece, at the Symposium
on "Climate Change - Threats, Challenges, Solutions for Greece", The American College of
Greece, Athens, 3 April 2019.
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It is a great pleasure for me to be here with you today and have the opportunity to share my
thoughts on climate change: the threats, the challenges and the solutions for Greece.
Climate change is gradually shaping a new environment. Research so far confirms that the
current and projected implications of climate change pose such threats to society and to
sustainable development that we cannot continue with a "business as usual" scenario. We need
to address challenges and to work on solutions, shifting to a low-carbon economy, managing the
risks and adapting to the changing climate.
During the past decade, environmental risks have progressively dominated the global risks
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landscape. It is telling that in the World Economic Forum's report , in 2019 for the third
consecutive year, three of the top five global risks, in terms of both likelihood and impact, are
environmental and all three are associated with climate change.
Historically, climate change can be attributed primarily to the actions of the large, industrialised
countries. However, its impacts are diffused to all countries, whether small or large, developed or
developing. This global nature of climate change means that cooperation and action at
international level is important. Therefore, the international community, through long negotiations,
has succeeded in reaching global agreements, such as the Kyoto Protocol and the more recent
Paris Climate Agreement, in order to address the problem on a global scale.
Greece, along with other small countries in the climate-sensitive Mediterranean region, is
expected to incur adverse effects from climate change. Acknowledging this fact, the Bank of
Greece has been one of the first central banks worldwide to actively engage in the issue of
climate change and invest significantly in climate research. Over the past ten years, the
interdisciplinary Climate Change Impact Study Committee (CCISC) of the Bank has been
working on all aspects of climate change, from climate science to environmental
macroeconomics, highlighting climate change as a key factor that should be horizontally
integrated into policymaking as it affects almost all sectors of the Greek economy.
Awareness of the economic value of ecosystem goods and services, which form the basis of the
global economy, promotes the sustainable utilisation of natural resources and good management
of natural systems. Within the Climate Change Impact Study Committee, environmental and
energy economists, working with climatologists, physicists, biologists, engineers and social
scientists, study the issue of climate change, analyse the economic, social and environmental
consequences for Greece, and advise on the way forward.
The studies highlight the wealth of Greece's natural resources, but also the risks to the country's
natural and human environment. Climate change appears to be a major threat, as the impact on
almost all sectors of the national economy is expected to be adverse. Under an inaction
("business as usual") scenario, the Greek GDP could, ceteris paribus, fall by 2% annually by
2050 and even further by 2100, while the total cost to the Greek economy could reach a
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cumulative €701 billion by 2100. ,
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Furthermore, according to a vulnerability assessment that quantifies and ranks the expected
climate risks for Greece, agriculture is the sector expected to be most severely hit by climate
change in Greece, while the impact on tourism and coastal systems will also considerably affect
household income and the economy as a whole. Moreover, the adverse impact of climate
change on the water reserves sector is also of particular significance, given its implications for
agriculture and water supply.
Recognising the importance of well-informed economic policymaking, the Bank of Greece
released last year the book The Economics of Climate Change, which provides a
comprehensive, state-of-the-art review of the economics of climate change and the emerging
area of environmental macroeconomics, focusing on the design of economic policy aimed at
controlling the climate externality. This publication aims to lay the foundations both for addressing
the role of monetary policy under conditions of global warming and for exploring the link between
monetary policy and climate change, a topic that remains high on our research agenda. It
acknowledges, of course, that monetary policy is not the primary tool for tackling climate change
but rather plays a supplementary role alongside fiscal, environmental and structural policies.
Decarbonising the energy system and financing the transition to a low-carbon economy,
consistent with the "well below 2 Celsius degrees" goal set out in the Paris Climate Agreement,
are among the major challenges of our time. Climate change and global warming are linked to
anthropogenic activity, in particular the use of fossil fuels and carbon emissions. Current and
future impact on society and sustainable development is such that renders the use of fossil fuels
prohibitive. We need to mitigate climate change by rapidly and drastically reducing emissions,
adopting appropriate energy management and high efficiency practices, financing green energy,
fostering energy-saving investment and promoting a low-carbon economy.
Along these lines, the adoption of policies and technologies leading to a low-carbon Greece, in
the context of European policies for climate change, can accelerate a transformation of the
Greek economy that offers opportunities for economic activity. Likewise, efficient adaptation
programmes, necessary as a damage control measure that has been found to reduce the cost
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of climate change by almost 30% , could provide a promising opportunity for Greece to boost its
growth performance and competitiveness, while implementing climate policies.
In this process, there are certain transition risks arising from the adjustment to a low-carbon
economy, for example potential stranded assets, business costs and disruptions. Yet, a careful
and timely transition will also open up opportunities, associated with the development of
innovative and renewable energy products, investment in energy saving, new infrastructure and
new jobs. The transformation of the economy towards decarbonisation cannot but have a
positive net outcome, as long-term value creation is a matter of transition to a low-carbon
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economy and effective climate risk management .
Since January 2019, the Bank of Greece has been a member of the Network of Central Banks
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and Supervisors for Greening the Financial System (NGFS) . The NGFS brings together central
banks and supervisors and comprises 34 members and six observers with the common
objective of strengthening the global response required to meet the goals of the Paris Agreement
and enhancing the role of the financial system in managing risks and mobilising capital for green
and low-carbon investments, in the broader context of environmentally sustainable development.
The members of the network aspire to exchange experiences, share best practices, contribute to
the development of environment and climate risk management in the financial sector and
mobilise mainstream finance to support the transition to a sustainable economy.
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NGFS members acknowledge that climate-related risks are a source of financial risk. It is
therefore within the mandates of central banks and supervisors to ensure that the financial
system is resilient to these risks. This is why central banks further support transparency and the
disclosure of data that will enable markets to lead the transition to a low-carbon economy so that,
with the right information, they can price in the cost of doing business, the climate risk and, most
importantly, evaluate new business opportunities. The proper assessment and supervision of the
financial risks stemming from the transition to a low-carbon economy are important factors in
promoting sustainable development and safeguarding the smooth functioning of the financial
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system .
In this context, the banking sector can also play an important role in addressing the threats and
challenges of climate change. The United Nations, through the Environment Programme Finance
Initiative (UNEP FI), sets out sustainability principles in the framework of contemporary banking
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practice. Currently under consultation, the Principles for Responsible Banking aim to define the
role and the responsibilities of the banking sector in a sustainable future, where banks align their
business practices with the global community goals and create value for society. The Principles
set out the criteria for responsible and sustainable banking, through a holistic evaluation of risks
and opportunities stemming from banks' activities. Furthermore, they encourage banks to identify
and assess the effect of their asset allocation decisions and be transparent on the resulting
positive and negative impacts on society and the environment.
As part of a roadmap towards sustainability, the Principles support and accelerate the
fundamental changes needed to achieve shared prosperity for current and future generations. If
we are to meet the Sustainable Development Goals of the United Nations and the objectives of
the Paris Climate Agreement, the banking sector needs to maximise its contribution and align
itself with these goals. Last month, the Bank of Greece officially endorsed the Principles for
Responsible Banking and, in its capacity as the national central bank, strongly urges all banks
within its remit to do the same and set ambitious targets.
Towards a sustainable future, scientific research and current developments confirm the need for
a dynamic strategy and an action plan to adapt to the changing climate. Climate change
adaptation, as a process of adjusting to climate effects in order to moderate the negative and
enhance the potential positive impacts of climate change, is a crucial issue spanning across
multiple economic, social and environmental policy areas.
Therefore, under a memorandum of understanding signed with the Ministry of Environment and
Energy and the Academy of Athens, the Climate Change Impact Study Committee drafted in
2015 the National Climate Change Adaptation Strategy, setting out the general objectives, guiding
principles and implementation tools for an effective and growth-oriented adaptation strategy, in
line with European directives and international experience.
Furthermore, fostering the adaptation process, the Committee is currently working, alongside the
Ministry of Environment and Energy and other key national actors, on the Life IP programme
"AdaptInGR - Boosting the implementation of adaptation policy across Greece". The programme
aims at advancing the implementation process of the National Climate Change Adaptation
Strategy of Greece by addressing specific objectives such as the systematisation and
improvement of decision making for climate change adaptation, the promotion of adaptation
policies and actions in all sectors, the establishment of monitoring mechanisms for the
evaluation and review of adaptation policies and the strengthening of the adaptive capacity of the
Greek society through awareness and dissemination actions.
Apart from public policies, the process of addressing climate change can undoubtedly be
accelerated if established growth models are adjusted in order to ensure long-term sustainability.
Under conditions of depletion of natural resources worldwide, a focus on more efficient use of
resources and minimisation of waste emerges is the obvious solution. The model of a linear
economy prevailing today (sourcing - manufacturing - use - disposal), on which most
economies since the Industrial Revolution have relied, is no longer sustainable. Just like nature,
which operates in a circular manner, business activity can become sustainable by switching
from the linear model to a circular one. Circular economy means that the value of products,
materials and resources is maintained in the economy for as long as possible and waste
generation is minimised.
This transition to a circular economy requires interventions on the supply side, such as
ecodesign and longer life cycles of products, as well as on the demand side, through a change in
consumption patterns and a more efficient management of waste, with appropriate financial
incentives and community engagement. This transition is expected to have a positive effect on
production, employment, climate, nature, natural resources and social well-being (11).
Along these lines, consumers can modify their behaviour and favour more sustainable practices,
as consumer demand can be a powerful driver, encouraging companies to switch to more
sustainable production practices and environmentally-friendly products. Another example is our
dietary habits that have a devastating effect on the planet's natural resources, land and water
reserves. A lower consumption of meat and dairy products would bring substantial savings on
cultivated land and water resources, reduce carbon emissions and help to gradually restore
forests and wildlife.
Focusing further on solutions, probably the most important thing we can do is educate the youth.
Education is a vital element of the global response to climate change, as it supports young
people to understand the impact of global warming, inspires changes in their behaviour and
increases climate literacy, limiting the scope for controversy over this serious issue.
It is for these reasons that the Bank of Greece, through the work of the Climate Change Impact
Study Committee, addresses climate literacy and has in the past decade organised a large
number of conferences, workshops, seminars and round-table discussions, as well as a public
consultation on climate and energy issues, ahead of the Paris Convention in 2015.
Furthermore, the Bank of Greece and the Goulandris Museum of Natural History signed in 2018 a
memorandum of cooperation for the design and the implementation of an educational
programme for young students, based on the research work of the CCISC. By educating the
youth we are empowering the next generation, the one that will be facing most of the impact of
climate change, to act and address climate-related problems and to build a new sustainable
society.
This focus, in part, explains my presence here at the American College of Greece, an
educational institution that acknowledges the importance of climate change and is committed to
develop a sustainability culture throughout its educational practices. Today's symposium,
exploring how Greece can tackle climate change, offers an opportunity for all, and especially for
the students, to be exposed to a variety of actors on climate change issues, stakeholders and
best practices. I would like to congratulate the organisers for taking this initiative and wish them
the best of success.
1
The Global Risks Report 2019, 14th Edition, World Economic Forum,
www3.weforum.org/docs/WEF_Global_Risks_Report_2019.pdf
2
GDP contraction relative to base year GDP at constant 2008 prices.
3
CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece,
pp. 453-457, available at: www.bankofgreece.gr/BogEkdoseis/ClimateChange_FullReport_bm.pdf
4
Τhe vulnerability analysis is included in CCISC (2015), National Climate Change Adaptation Strategy (NCCAS),
pp. 7-13, available at: www.bankofgreece.gr/BogDocumentEn/National_Adaptation_Strategy_Excerpts.pdf
5
CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece,
pp. 453-457, available at: www.bankofgreece.gr/BogEkdoseis/ClimateChange_FullReport_bm.pdf
6
Carney, M., "A transition in thinking and action", speech at the International Climate Risk Conference for
Supervisors, De Nederlandsche Bank, Amsterdam, 6 Αpril 2018, available at:
www.bankofengland.co.uk//media/boe/files/speech/2018/a-transition-in-thinking-and-action-speech-by-mark-carney.pdf?
la=en&hash=82F57A11AD2FAFD4E822C3B3F7E19BA23E98BF67
www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system
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According to Mark Carney (Governor of the Bank of England) and Michael Bloomberg (chair of the Task Force on
Climate-related Financial Disclosures), "... financial disclosure is essential to a market-based solution to
climate change. A properly functioning market will price in the risks associated with climate change and reward
firms that mitigate them. As its impact becomes more commonplace and public policy responses more active,
climate change has become a material risk that isn't properly disclosed..", The Guardian, 14.12.2016, available
at: www.theguardian.com/commentisfree/2016/dec/14/bloomberg-carney-profit-from-climate-change-right-
information-investors-deliver-solutions
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www.ecb.europa.eu/pub/pdf/other/ecb.mepletter171010_Urtasun.en.pdf?
utm_medium=email&utm_source=nefoundation&utm_content=8+-+response&utm_campaign=banks-22Nov&source=banks-22-Nov
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www.unepfi.org/banking/bankingprinciples/