Without preempting the discussion, there are two opposing views regarding the debate on greening asset purchases. One view is that central banks would overstep their mandate if they were to discriminate among investors on the basis of considerations that fall into the realm of fiscal policy. According to this view, market neutrality is the benchmark central banks should use when purchasing bonds issued by corporates. The other view is that central banks have to respond to market failures and incorporate the far-reaching risks that climate change poses to price stability when designing their policy instruments. Importantly, this argument is not about weighing secondary objectives, which may provide additional justifications for monetary policy taking into account climate change. It is about protecting the primary objective. Of course, central banks would need to be mindful of their effects on market functioning. Overweighing green assets in monetary policy portfolios could crowd out other investors, thereby doing more harm than good. And while demand can create its own supply, success would ultimately hinge on green issuance growing substantially as the economy transitions towards its new equilibrium. Conclusion Let me conclude. The current crisis teaches us that decisive and early action is crucial to tackle global disruptions. It enables us to better imagine the much more dramatic consequences that society could face if we were to fail on our efforts to fight climate change. And while the pandemic can eventually and hopefully be cured, global warming is much harder to reverse, raising the costs of taking no action today.
[3] Moreover, studies have uncovered a significant lag in discerning the benefits of mitigation measures,[4] which makes it much harder to impose costs on society today if measurable results are available much later. By making the costs of a major, truly global crisis more tangible, the pandemic may help to remove the “tragedy” from Mark Carney’s horizon: after COVID-19, the dramatic consequences of a global climate crisis may be much easier to imagine. And given the need for fundamental structural change after this crisis, the willingness to use this chance to take precautions against the even bigger risk of a climate crisis may have increased. In order to achieve the European Union’s target of net-zero greenhouse gas emissions by 2050, our response to the growing risks of climate change has to start with the way we rebuild our economies after the pandemic. In my remarks this morning, I will argue that three complementary pillars are needed to accelerate the transition towards a low-carbon economy: an effective carbon price, a strong investment programme and a greener financial market. I will also argue that central banks have a role to play in mitigating climate-related risks, even within their traditional mandates, because global warming poses severe risks to price stability. Carbon pricing as the central tool So let me start with the first pillar, the introduction of global carbon pricing. Europe is already spearheading global efforts, which is essential at times when a global solution is not in sight.