[2] Given the economic and social hardship associated with this year’s reduction, such a drop is hardly feasible by simply reducing economic activity. The pandemic is therefore a stark reminder that preventing climate change from inflicting permanent harm on the global economy requires a fundamental structural change to our economy, inducing systematic changes in the way energy is generated and consumed. With brutal clarity, the current crisis has exposed two major risks to the global economy: first, the farreaching damages imposed on our society by a lack of prevention and early action, fostered by disbelief in science, in the face of a global shock that threatens not only the economy but our lives. And, second, the repercussions of a failure to act collectively in a globalised world where inaction in one part of the globe can lead to highly disruptive and long-lasting spillover effects in other parts, hitting the poorest and most vulnerable in our societies most severely. In this sense, the pandemic has been a warning shot with regard to the much greater challenge arising from climate change. In his famous speech, Mark Carney, then Governor of the Bank of England, has argued that “the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix”.
In any case, as a policy, the Central Bank at the moment of making a decision and defining scenarios takes as given what happens in other spheres of national life. There is no clear rule, but there are some principles. First, the Central Bank must be rigorous in referring to all matters that have macroeconomic impact and consequently condition its actions. Secondly, when the connection is not so straightforward, we must be particularly cautious, especially when politically controversial subjects are involved. The Central Bank is a technical and autonomous institution and must take great care that the messages it puts out are not used politically. There are some very important subjects requiring discussion in our country, such as the educational reform, but it would not be prudent for the Bank to be affected by approaching any matter in an inadequate or inopportune way. Even more complex would be to discuss a tax reform that changes the composition of taxes or a labor reform that alters the dynamics of the business cycle. Subjects like these have enormous implications for economic efficiency, but they also evoke tremendous political passion. Since there are no clear rules, and I have no defined position on this matter, I can offer two popular recommendations that I tend to follow: “nothing can be rejected out of hand” which allows an ample degree of flexibility and “when in doubt, refrain,” which is the best advice to prudence.