ravi menon : a vibrant carbon market for a low carbon future opening remarks by mr ravi menon, managing director of the monetary authority of singapore, at the climate impact x announcement event, singapore, 20 may 2021. * * * minister for national development mr desmond lee, ladies and gentleman, good afternoon. let me start with the big picture. to limit global warming to 1. 5°c, global annual greenhouse gas emissions need to be halved by 2030 and reduced to net - zero by 2050. yet, the trajectory of carbon emissions is still on a steady uptrend. just on energy needs alone, demand in asia is projected to double in 2030. economic development will drive demand for fossil fuels, which is still the cheapest way to generate electricity in many parts of asia. the switch to cleaner energy sources cannot be made in one leap. coal accounts for about half of asia ’ s total energy supply today. we need to shift the energy mix progressively, first to relatively less emissions - intensive fuels like natural gas, and then to renewables. this shift will require fundamental infrastructure changes : refurbishing power plants to generate cleaner fuels ; and upgrading the power grids to manage different energy sources and to minimise the intermittency of renewables. to make this progressive shift to a low - carbon future, asia will need a lot more transition financing than is available today. to spur more green finance for transition, we need to have two things in place : a price on carbon, and a market for trading carbon credits. carbon prices and carbon markets climate change is the result of probably the biggest market failure in history. for the longest time, the world did not put a price on the carbon emissions that have steadily degraded our environment and now pose serious climate risks. a meaningful price on carbon is critical to create the right incentives to reduce emissions. the challenge is to arrive at the right price, one that does not unduly impede economic development and yet is sufficient to drive decarbonisation efforts that will enable the world to meet its climate targets. carbon pricing is gaining momentum. globally, there are 61 carbon pricing initiatives in place, half of them carbon taxes and the other half emissions trading systems. 1 / 5 bis central bankers'speeches singapore introduced in 2019 a carbon tax of $ 5 per tonne of greenhouse gas emissions, to establish the principle of a price on emissions. the original intention was to gradually raise the tax from 2023 onwards to between

for domestic inflationary pressure, the mpc has raised bank rate twice ; it now stands at 0. 75 %. the fpc, meanwhile, judging that the domestic risk environment had returned to a standard level, has also raised the counter cyclical capital buffer twice to 1 %. looking ahead, if we get a smooth brexit with a transition deal, as assumed in the mpc ’ s latest inflation report forecast ( table a ), i expect growth to pick up, leading to excess demand and building domestic inflationary pressure, so that further monetary tightening is appropriate to maintain monetary stability. relative to the best collective judgement expressed in the mpc ’ s central forecast i am, as i have set out in my talk today, a little more pessimistic on gdp growth than my colleagues on the mpc. but as i have discussed, that is true both on the supply side, where i can see more downside risks to productivity, and on the demand side, where i am less optimistic that investment will recover as much as it does in the central forecast. those two risks broadly offset each other in terms of the balance of demand and supply, meaning that my best guess for inflation, and the outlook for policy, is in line with the central view. but as i have argued today, the outlook for policy depends on more than just our central expectation for the path for the economy – we need to consider the risks as well. my third lesson from the crisis was that policy needs to be prepared for the unexpected. that is true both for the mpc, who need to take the balance of risks to their central forecast into account when setting monetary policy, and for the fpc, who set financial policy based on their assessment of the risks to financial stability. the fpc track a very large number of risks ; i will focus on just two – first, market volatility, and, second, brexit. 6 jon cunliffe ’ s speech “ financial stability post brexit : risks from global debt ”, available online at https : / / www. bankofengland. co. uk / / media / boe / files / speech / 2019 / financial - stability - post - brexit - risks - from - global - debt - speech - by - jon - cunliffe. pdf, goes into more detail on several key risks including brexit and global risks. all speeches are available online at www. bankof