4. 2 the second channel : transition risks it should be taken as a fact that the 2 - degree goal under the paris agreement can only be reached if economies across the world are transformed into green, low - carbon economies. achieving this transition will require potentially disruptive technological advances as well as farreaching changes in climate policy. without a doubt, such a transition will prompt markets to reassess the value of a broad range of assets. depending on how quickly and orderly the transition and the associated re - pricing occur, they could become highly relevant for the stability of financial institutions as well. to illustrate one particular transition effect, let ’ s look at the concept of the “ carbon budget ". meeting the target of the paris agreement will require limiting global carbon emissions. the intergovernmental panel on climate change estimates that in order to reach the 2 - degree target with a probability of just 50 per cent, the maximum amount of additional carbon emissions this century must roughly remain below 1, 100 gigatonnes of co2. for higher probabilities of success, lower carbon budgets apply. however, the total amount of carbon embedded in all known global fossil fuel reserves is estimated at roughly 2, 800 gigatonnes. this means that, to reach the 2 - degree target with a reasonably high probability, about two - thirds of all known coal, oil and gas reserves must remain in the ground. but the future exploitation of these reserves is what many companies base a significant share of their value on – especially, but not only, those engaged in extracting and refining them. according to the world wide fund for nature, listed fossil fuel companies currently carry more than half of the total global fossil fuel reserves on their balance sheets as assets. if these reserves cannot be developed, the corresponding assets become worthless – they become what are known as “ stranded assets ". the decision to actually limit emissions would be made by governments, and their tool would be climate - related laws and regulations. and there is a clear trend towards more government intervention. the global climate legislation study found that, since 1997, the number of climate change laws and policies has doubled every 4 - 5 years. while the pace has been levelling off recently, the trend is clear. we have already seen examples of sharp devaluations in the fossil fuel and energy sector. one oft - cited example are the top four us coal producers. their combined market capitalisation has fallen by well over 90 per cent since 2010. listed utility

of long - term refinancing operations. last week, for our main refinancing operations, we decided to switch from a variable - rate tender with a minimum bid rate to a fixed - rate tender at the policy rate with full allotment, implying that financial intermediaries no longer face uncertainty about the share they will be allocated. together with our decision to narrow the interest rate corridor for the standing facilities, this should also improve our ability to stabilise the overnight money market rate close to the policy rate and to adequately signal our monetary policy stance. since december of last year, we have also provided liquidity in us dollars against ecbeligible collateral, as part of a coordinated action by the central banks of several major advanced economies, including notably the united states'federal reserve. the amount of us dollar liquidity provision has in the meantime been increased, in view of the growing tension. yesterday, the governing council decided to further enhance the provision of longer term financing operations through fixed rate tenders with full allotment. taking into account the substantial extension of the liquidity, as well in euro as in dollars, provided by the eurosystem and as there were signs that some counterparties were getting constrained by collateral, it was further decided to expand the list of eurosystem collateral. in a climate of generalised distrust, some financial institutions have come under particularly strong pressure. when they are systemically relevant, public authorities had to intervene in order to avoid contagion effects. in the euro area, it is up to national central banks to provide emergency liquidity assistance and to governments to reinforce the solvency of such institutions in order to restore confidence. governments have recapitalised some institutions and have provided public guarantees to restore confidence in the interbank market. smooth cooperation among all players involved is crucial. in particular, when the central bank does not directly supervise credit institutions, it is essential for it to receive without delay all relevant information. our second concern is that, at the same time, we need to think about and choose the appropriate monetary policy stance. in doing so, we have to take a somewhat longer perspective and weigh up the implications of the financial turbulence for the consumption and investment decisions of the various sectors in the economy, as these will in turn determine future outcomes for economic growth, employment and inflation. eventually, the policy stance is set to optimise macro - economic outcomes, given all ongoing shocks ( and that includes other shocks like rising