speech the european climate law and the european central bank keynote speech by frank elderson, member of the executive board of the ecb and vice - chair of the supervisory board of the ecb, lustrum symposium organised by dutch financial law association amsterdam, 1 december 2022 i am honoured to speak at this 20th anniversary dinner, with so many distinguished lawyers around me. in this setting, i feel quite comfortable dwelling on legal issues for a while. a topic close to my heart – apart from the law – is the ongoing climate and environmental crises. i am glad that we have long since moved on from the time when only scientists and activists were concerned with this topic. it is now high on policymakers ’ agendas, as we saw at the recent united nations conference of parties ( cop27 ) at sharm el - sheikh, at which – along with world leaders and a wide range of policymakers and interest groups – the ecb was also represented. i was struck by one story in particular. [ 1 ] the tiny pacific nation of vanuatu is badly exposed to cyclones and rising sea levels. to the inhabitants of vanuatu, climate change is a human rights issue. and, as vanuatu ’ s president, nikenike vurobaravu, stated, “ we are measuring climate change not in degrees of celsius or tonnes of carbon, but in human lives. ” vanuatu now plans to ask the un general assembly to seek an opinion from the international court of justice on the human rights implications of the climate crisis. that opinion could determine the rights of countries most exposed to climate change. it could also touch on the obligations of those most responsible for driving the climate crisis. let ’ s now focus on europe and the possible implications of these developments in international law for my own institution, the ecb. under the paris agreement adopted at cop21 in 2015, many countries committed to the long - term goal of holding the increase in the global average temperature to well below 2°c above pre - industrial levels. to fulfil its commitment as one of parties to the paris agreement, the eu last year adopted the european climate law. [ 3 ] the implications of the climate law are significant. before going into why, let me first explain what the climate law does. the climate law has three key elements. the first is its objective that the eu reduce its greenhouse gas emissions by at least 55 % by 2030, with a new reduction target to be set for 2040. the eu should achieve

. let ’ s turn briefly to 2015 and the run - up to last december ’ s increase in the federal funds rate – also an important focus of the paper. the authors and many market participants are critical of communication around the september meeting. with the june 2015 summary of economic projections ( sep ) showing that 15 of 17 fomc participants judged that appropriate policy would entail an initial increase in the federal funds rate by the end of 2015, markets saw about a 50 percent chance that the first increase would occur in september. this probability fell to about 30 percent after global markets experienced a sudden bout of volatility following china ’ s surprise devaluation of its currency in august. at the september meeting, the fomc decided to wait to see how global markets and the economy evolved, noting in its statement that “ recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. ” 13 a data - driven committee, making decisions meeting by meeting, is likely to surprise markets from time to time. the authors join many others in criticizing the “ measured pace ” period of 2004 through 2006, during which the committee increased rates by 25 basis points at 17 consecutive fomc meetings. a common criticism has been that this high level of predictability made investors complacent, encouraging a buildup of leverage and helping set the stage for the global financial crisis. that criticism may well overstate the importance of the committee ’ s communications ; nonetheless, a number of fomc participants have said that the committee intends to be “ data driven ” and not fall into an excessively predictable, datainsensitive path. lower predictability implies more surprises. in the statement released after its october 2015 meeting, the committee reemphasized data dependence and focused on the importance of incoming data for the committee ’ s decision “ at its next meeting, ” which led the market to increase its estimated probability of a december rate and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. in determining the size, pace, and composition of its asset purchases, the committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. ” ( board of governors of the federal reserve system ( 2012 ), “ federal reserve issues fomc statement, ” press release, december 12, paragraph 4. ) ben s. bernanke ( 2015 ), the courage to