Nowadays, central banks are entrusted with the fundamental task of providing citizens with costless access to simple, secure and risk-free means of payment that can be used on a large scale. Delivering on this task requires central banks to analyse relevant developments in society and adapt accordingly. In order to be able to give Europeans easy access to a safe form of central bank money in a society that is moving increasingly quickly towards digital payments, the ECB’s Governing Council has decided to advance work on the possible issuance of a digital euro. Should the need arise, we want to be ready to introduce a digital euro: a form of central bank money that would complement cash, not replace it. Together, these two types of money would be accessible to all, offering greater choice and easier access to ways of paying. After publishing our report on a digital euro on 2 October, we are now in a phase of listening and experimentation. Our exchange today is a key step in this phase and marks the launch of the ECB’s public consultation.6 I will come back to this consultation in a moment. But first I will outline the characteristics of a digital euro, as well as the advantages and the challenges it could present. I will also discuss some scenarios that could require the ECB to issue a digital euro. What is a digital euro?
Second, economic transformation in response to climate change, as a result of an adaptation and mitigation process, will also require the financial sector to adapt, by managing risk and by exploring opportunities for business. Third, being a prominent sector in the economy, the financial system can also be an agent of change, supporting the adaptation and mitigation process, through its influence on financial resource allocation, through developing supportive financial services, markets, and products, as well as engaging climate change in its own business agenda. Let me elaborate in more details on each of these points, starting with the macro impact and implications for the financial system. Conventional wisdom at this time is that the macroeconomic impact from climate change can be large, but uncertain. For example, estimates from three benchmark studies, as cited by the IMF, point to a mean GDP loss of about 0-3 percent of global GDP for a 3oC warming. In Asia, South and Southeast Asia are to be amongst the regions most likely to experience the most negative effects. Such macro-impact is tantamount to a supply shock on the country’s long-term productive capacity i.e. capital stock and technology, leading to a decline in long-term output growth, higher production cost and inflation, shift in relative price away from carbon-based energy, and a decline in productivity. Some countries may suffer balance of payments problems if they are financially unable to cope with the impact.