Benoît Cœuré: Monetary policy and climate change Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at a conference on "Scaling up Green Finance: The Role of Central Banks", organised by the Network for Greening the Financial System, the Deutsche Bundesbank and the Council on Economic Policies, Berlin, 8 November 2018. * * * 2018 has seen one of the hottest summers in Europe since weather records began.1 I would like to thank Torsti Silvonen, Fabio Tamburrini and Sam Langfield for their contributions to this speech. I remain solely responsible for the opinions contained herein. Increasing weather extremes, rising sea levels and Arctic melting are now clearly visible consequences of human-induced warming.2 Climate change is not a theory. It is a fact. While only one dimension of the human cost, the consequences in macroeconomic terms look set to be large. Without further mitigation, cumulative emissions pose significant risks of economic disruption.3 While there is a wide recognition that environmental externalities should be primarily corrected by first-best policies, such as taxes4 , all authorities, including the ECB, need to reflect on, and consider, the appropriate response to climate change. In recent years, central bankers, led by Bank of England Governor Mark Carney, have started discussing the financial stability implications of climate change.5 The first tangible results are trickling in. The Financial Stability Board’s Task Force on Climate-related Financial Disclosures published its first status report just a few weeks ago.

Sixth, the labour market will undergo a major adjustment. Jobs will be lost in traditional carbon-intensive sectors but new jobs will be created in carbon-neutral industries. It is estimated that about 200 million jobs would be created and 185 million lost globally by 2050 from a net-zero transition. There will be a period of net job losses during the transition: foundry workers will not instantaneously be transformed into building-insulation experts. Worker reskilling and redeployment will thus be crucial. Identifying skills adjacencies will be a key part of worker retraining programmes. In Singapore, a comprehensive strategy to green the economy is taking shape, with a focus on boosting energy and resource efficiency and creating good jobs. 6/9  BIS central bankers' speeches  In the petrochemical industry, all the major players have committed to reach net zero by 2050 and government agencies, industry players, and research institutes are developing capabilities in carbon capture and storage technologies. In the maritime industry, investments are being made to help our port terminals become net zero by 2050 and support the provision of low and zero carbon marine fuels such as ammonia, hydrogen, and biofuels. In road transport, Singapore aims to do away with the internal combustion engine and switch to electric vehicles by 2040. Singapore enjoys a trust premium; many emerging green services, like the trading of carbon credits and monitoring, reporting, and verifying carbon emissions, are built on trust. TRANSITION FINANCE The fourth enabler for the path to net zero is transition finance.