per callesen : the role of financing and regulation amid broader policies to mitigate climate change speech by mr per callesen, governor of the national bank of denmark, at the green climate fund's 2019 private investment for climate conference, seoul, 8 october 2019. * * * thank you for the invitation. it is good to be back at the gcf. 2011 – 2014, i served as a member of the transitional committee and the board. today, i will focus on the role of financing and regulators in the context of broader policies to mitigate and adapt to man - made climate change. this past year has seen stronger engagement in climate issues around the world. this is most welcome. there has been better engagement by the financial industry. central bankers and financial regulators are now involved in addressing climate - related financial risks. the climate challenge is so large that all players in our economies, all areas of policy, and all countries in the world will have to deliver and push in the same direction. we need to be aware of the context. others are better placed to consider developments in emissions and the setting of targets for future reductions. my perspective is the policies needed to meet objectives. i remember the early 1990s, almost thirty years ago. we understood the climate impact of co2 emissions, and we began assessing how economic scenarios affected emissions. the policy implication was pretty clear : announce a credible path of gradually increasing carbon pricing to set expectations right without affecting already undertaken investments by firms and households too much. that has not happened. an appropriate pricing of fossil fuels, in line with the true costs of co2 emissions, would still be the most efficient driver of the needed climate - friendly innovation, investment and behavioural change of billions of people and hundreds of millions of firms. that behavioural change is needed to incentivise the rolling out of existing and upcoming technologies. we need more information on policies setting emissions, country by country. but we know that the current average direct global price of carbon is 2 usd per ton, approximately zero. only about 20 per cent of global greenhouse gas emissions are covered by a carbon price. only a fraction hereof is priced at levels consistent with the paris agreement. the price of most co2 - intensive products, such as oil, gas and electricity, etc., is in some cases raised by close proxies of direct carbon pricing, such as fuel taxes. in other cases, the price of such products is reduced by fossil fuel subsidies.

by historical standards. real disposable incomes are likely to grow at a much slower pace in the coming years, but nevertheless we expect private consumption to increase somewhat, so that the consumption ratio will approach its normal level. we also expect a certain increase in private investment as firms benefit from rising demand, both at home and abroad. based on the above, danmarks nationalbank expects growth in denmark to be just under 2 per cent p. a. this year and the next few years. this is slightly higher than the expected growth rate in the euro area, and also higher than the underlying growth in denmark ’ s output potential. as a result, net unemployment is set to decline slowly towards its structural level of around 100, 000. structural unemployment is the level of unemployment that is sustainable in the long term and that is compatible with low and stable danish inflation in line with that of the euro area. although the loss of output was unusually large during the crisis, unemployment was so low at the outset that net unemployment has not risen much above its structural level after the crisis. furthermore, as i have already mentioned, the economy is set to grow at a solid pace by danish standards in the coming years. we can also see that the european sovereign debt crisis has made international investors far more aware of whether individual countries are pursuing responsible fiscal policies. that is why danmarks nationalbank repeatedly urges the danish government to maintain the tight fiscal policy planned for the coming years. we do not need any new stimulus packages at the moment. if, contrary to expectations, the international economy goes into reverse again, it would be sad if denmark uses up all its fiscal policy room of manoeuvre right now – at a time when the economy is actually moving forward. if our expectations are exceeded, it would not be good to have exploited the scope for growth beforehand. in that case the risk of renewed overheating would be imminent. * * * denmark experienced strong cyclical fluctuations in the last decade. they were not only attributable to the international financial crisis, but were to some extent self - inflicted. partly because fiscal policy had been eased during the boom, and partly because we have bis central bankers ’ speeches introduced a number of housing market structures that amplify rather than dampen cyclical fluctuations. these include the freeze on property value tax in kroner and the development of new loan types, notably loans with deferred amortisation. they are also known as loans with payment holidays