robert holzmann governor oesterreichische nationalbank welcome remarks october 7, 2021 climate protection : state of play, division of labor, steps forward conference organized by the oenb in cooperation with suerf honorable guests, ladies and gentlemen, dear colleagues, a warm welcome to everybody – those participating here on the premises of oesterreichische nationalbank and those of you participating remotely. i am delighted that at least some of you were able to join us on - site, which gives us a taste of normality in exceptional times. but the impression of “ back to normality ” is deceptive. the pandemic has compelled us to adjust to a new normality, which helps us learn to adapt our society and economy to another new normality – the long - term challenge of climate change, the topic of today ’ s high - level event. who would be better suited than lord stern to give a bird ’ s - eye view of the current state of play in global and european climate protection and adaptation politics? professor nicolas stern chairs the grantham research institute on climate change and the environment at the london school of economics. he was chief economist of the ebrd and, later, of the world bank. i remember many productive interactions when i served at the world bank ’ s research committee that he directed. lord stern later held several positions including that of the second permanent secretary to her majesty ’ s treasury, but may be best known for heading the influential stern review on the economics of climate change, published in 2006. his publication record is impressive, encompassing more than 15 books and 100 articles. among the various prizes he received is the austrian schumpeter award. at the award ceremony here at oenb six years ago, he highlighted the opportunity that low - carbon technologies offer to generate prosperity and wealth. today, however, we want to move the discussion about the transition to a low - carbon economy forward – from the “ why ” to the “ how ”. nicholas has a lot to say on why we should change but certainly also on how to build coalitions, mix policies and coordinate activities in europe and beyond to achieve globally agreed emission goals. let me highlight a few challenges regarding both the why and the how. publisher and editor : oesterreichische nationalbank communications division otto - wagner - platz 3, 1010 vienna, po box 61 why is climate change relevant for central banks? the simple answer is, because climate change affects our targets

– foremost price stability, but also financial stability and other economic objectives. consequently, the ecb governing council has taken important climate - related decisions, i. e. decisions on monetary policy this summer, on the eurosystem ’ s non - monetary policy portfolios last winter and on the ecb ’ s supervisory duties much earlier. we do what we can – of course, within the limits of our mandate – not only because we must, but also because we want to contribute. one way how we could contribute most effectively is by fulfilling our role as an economic think tank, highlighting challenges and providing impartial advice on questions such as, what instruments to cut emissions are preferable : direct carbon taxation or emission trading or emission standards and other command and control regulation? nicholas stern helps us to answer this question with his famous sentence “ climate change is a result of the greatest market failure the world has seen. ” so, the answer would simply be to make the polluters pay. carbon pricing is technologically neutral and cost - efficient. however, there is also some room for command - andcontrol and financial regulation to tackle other market failures such as asymmetric information. there are two options to tag a price on “ bad ” technology or behavior : imposing a tax or establishing a cap - and - trade regime. in theory, the two options should deliver the same results, because quantities and prices determine each other, regardless of where you start from. and despite the beauty of an emission trading system resembling an ideal market, economists tend to prefer a tax. a tax is simple, provides easily accessible information and creates forward guidance for all economic agents. however, vested interests tend to hijack the debate and exploit the confusion about the variety of policy options. i fear a bazar might emerge, a bazar that may lead to inefficient measures and even have a taste of planned economy. however, i have to accept that we live in a real world where solutions are often second best. i am sure even friedrich hayek would have agreed that taking any climate action is preferable to doing nothing. after the keynote, we would like key players and stakeholders to get to talk to each other. therefore, we have invited high - level representatives from government, european and global institutions, business, finance, central banks, and rating agencies. we want to know from you what policy fields, policy mix and policy actors are best suited to reach the global net - zero goal.