informed judgment than before. meanwhile, prof. peter j. sinclair argued that consumption of nature ’ s capital calls for taxation so that there would be rewards for depleting natural capital more slowly. regarding t he terminology of “ green gdp ”, prof. sinclair argued that it is a misnomer in that it focuses on gross income, and not on income net of depreciation in any sense. so it is fiscal policy that is centre stage in this regard, not monetary policy. he has showed that the trend of ad valorem fossil fuel taxation can have important consequences, even if inter - temporal issues imply that its level may be irrelevant. nevertheless, global warming has important implication for monetary policy, through its long run impact on rates of real interest and growth, and its short run repercussions on the level of prices of fossil fuels, which may react quite strongly to changing perceptions of the character and extent of the global warming phenomenon. at the last of this session, dr. junggun oh identified impacts of climate change which might be a decrease in the potential capacity of growth, a rise in the inflation rate, a decrease in capital flows, and deterioration of exports, and thus a slowdown of global economic growth followed by changes in market interest rate. thus the tough challenges faced by the central bank is how to keep the commitment to price stability on the one hand and how much to take the possible worsening economic growth and employment into account. as wit h lacunza, dr. oh argued that climate change are largely supply shock, yet the central bank should set the optimal target rate of inflation based on studies on the impact of climate change and inflation rate. distinguished guests, ladies and gentlemen, session three of this seminar was designed to discuss the role of fiscal policy in promoting environmental friendly growth and development. fiscal stimulus among other policy measures, could encourage a market in developing green investment and production towards sustainable economic growth. as the first speaker of this session, prof. emil salim highlighted the fact that market failure has locked conventional market economy in an unsustainable pattern of development with no environmental values. this has caused a subsidized growth of economy, followed by bursting energy and food crisis comparable to what we are seeing now. at the global level market failure is perpetuated by the absence of independent global institutions to develop market corrections, while a t the national level, market failure prevails with subsidized energy in conventional growth without any considerations on pollution costs

##mer emphasized that developing countries are taking center stage in the climate change issues. this conviction relies on the fact that ( i ) growth in developing world is much faster than expected during the 1990s and the cheapest mitigation options are in developing countries, ( ii ) developing countries are most vulnerable to climate impact and it has come earlier than expected, and ( iii ) current analysis includes distributional impacts within countries and poor are hit hardest. for that reason, climate change policies must be integrated into development strategy, and developing countries have to become key players in those policies. prof. iwan jaya azis on his presentation, “ exploring economy - wide impacts of climate change in a resource - rich country ” shared with us his finding from his analysis on these issues using recursive dynamic computable financial general equilibrium ( cfge ) model. his research was empirically based on resource - rich country, such as indonesia, with a concentration on the area that the country faces substantial challenges in terms of declining productivities due to climate change, such as food, mining, forestry and fisheries. one of his finding is that optimizing the innovative approaches on developing indonesia ’ s enormous biological potential seems to be able to avoid a trade - off between mitigating climate change and maintaining macroeconomic stability. it was also pointed out that the appropriate policies of mitigation that lead to productivity improvements do not always involve a trade - off between income growth and poverty reduction. furthermore, he showed us his support on carbon credit scheme, but raised issues as to whom the financial revenue should go to. ladies and gentlemen, the second session discussed whether there is a role for central bank in climate change adaptation. we started with two issues from the viewpoints of central bankers as brought up by the first speaker, hernan lacunza, namely how will climate change impact on the macro economy and what is the best way for monetary policy to deal with it. lacunza argued that monetary policy by itself can not do a particularly efficient job of controlling or mitigating the factors that lead to climate change. instead, monetary policy can devote efforts to adapt to climate change so that its contribution to macroeconomic stability is not jeopardized. the key here is to be flexible, in particular, the standard inflation targeting approach could be modified as necessary, in order to deal with persistent supply shocks – through the use of countercyclical policies as reserve accumulation, exchange rate management, and a more extensive use of