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

is possible that this will lead to a slightly faster increase in prices than would otherwise have been the case. if the increased opportunities to borrow were to have a full impact on house prices, the reform could push up prices by around five per cent. the price increases would probably be highest in the parts of sweden with the higher taxation values, where they have previously paid a relatively higher tax rate. however, there are a number of factors that imply that this calculation probably overestimates the effect on prices. firstly, the government has been indicating for some time that it intended to lower property tax. it is therefore possible that house prices have already been affected to some extent by the decision. secondly, the price increases could be counteracted by the higher capital gains tax. thirdly, if households believe that the property tax will in some way be increased in the future, it is not certain that they will be prepared to increase their borrowing. as i said, it is not easy to measure the overall effects of the changed taxes. this is a subject which i believe we will have reason to discuss further in the future. in the slightly longer term, however, developments in indebtedness and also property prices will slow down. quite simply, it is not sustainable in the long run for households to allow their debts to grow more rapidly than their incomes. households would ultimately be unable to pay their loans. in the long run it is more probable that indebtedness and house prices will increase roughly at the same rate as nominal growth in the economy. this type of adjustment to more restrained growth rates will normally occur smoothly, as households begin to feel that their finances cannot tolerate a higher level of indebtedness. if there is an overly sharp correction, it could lead to weak growth in the economy for a long period of time. in this case it would also have effects on inflation. given these consequences, it is not reasonable to entirely ignore the risks with such rapid growth in house prices and loans. there may also be justification for taking these factors into account when we make our monetary policy decisions. to contribute to some extent to a smoother adjustment, we have therefore chosen on a couple of occasions to raise the interest rate slightly sooner than planned. this method of reasoning was also one reason why i entered a reservation against the decision to keep the repo rate unchanged at the most recent monetary policy meeting at the beginning of may. i advocated raising the repo rate by 0. 25 percentage points