The global climate crisis – a challenge that requires cooperation To be able to answer the question of whether the Riksbank can and should have an active role in combatting climate change, we must first answer two other questions. First, what is effective climate policy? And second, what lies within the Riksbank’s mandate? One of the fundamental causes of the climate crisis is the fact that, in the absence of climate policy, greenhouse gases can be released free of charge, despite the damage such emissions cause. Economists tend to call the negative effects for which the individual emitter does not need to pay negative “external” effects. Neither does it matter where on Earth the greenhouse gases are emitted. Emissions have the same effect on global warming regardless of whether they occur in China, the United States or Sweden. Climate change is, in other words, a global challenge that is best met through global cooperation. 13  See Lagerwall (2019). 8 [18]  A price on carbon is the highest priority To tackle the negative external effect of greenhouse gas emissions, a price on carbon is required.14 The most effective solution would be a uniform price on carbon emissions all over the world. This can be arranged through carbon taxes or through trading in emission rights.
SPEECH DATE:  2020-03-03  SPEAKER:  Deputy Governor Anna Breman  VENUE:  Royal Swedish Academy of Engineering Sciences, Stockholm  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  How the Riksbank can contribute to climate policy1 I would like to start by extending a warm thank-you to Stockholm Resilience Centre, Stockholm Environment Institute, Kungliga Vetenskapsakademien, och Misum for arranging this seminar. Perhaps you recognise the expression Hinc robur et securitas. It is Latin for From here, strength and security. It is the Riksbank’s motto. It is on the Riksbank’s emblem and it has also be seen on some of our banknotes. I learnt this when I arrived at the Riksbank as a new Deputy Governor a few months ago and it stuck – from here, strength and security. As a new Deputy Governor, I feel a responsibility for preserving the Riksbank’s role as a guarantor of strength and security when the world around us is fraught with unease – unease over trade wars, unease over the coronavirus, and unease over climate change, to give a few examples. For a new Deputy Governor, it also becomes evident that those of us in the Executive Board make decisions that affect economic development for households and companies for several years to come. But the statistics we require to fully understand developments can sometimes be incomplete and forecasts are always very uncertain.