For example, it will modify both the demand and supply of fossil fuels through multiple channels, with ambiguous effects on market prices along the transition path. It will also affect the cost and availability of renewable energies, which also influence the substitution away from fossil fuels and therefore their cost. Today I will examine the possible implications of the green transition for energy prices.
But by being careful about the extent that capital levels respond to cyclicality, we are trying to make sure that risk signals do not on their own generate added instability. This requires some balancing. Greater responsiveness of regulatory capital ratios to risk is something that institutions will have to learn to manage under Basel II.