This quadrant [slide 4] shows four categories of possible shocks linked to the transition. They can have a positive versus negative impact on supply, and a positive versus negative impact on demand respectively. They are not mutually exclusive, and may combine or succeed one another. Their stand-alone probability is hard to assess at this stage, but there are reasons to believe that the upper-left one (the negative supply shock) is slightly more probable than the  Page 5 sur 8 others. However, given the large range of shocks, their sources and macroeconomic effects – which could include a positive scenario of large green private capex v – [slide 5], we must continue our modelling, in line with our first commitment in relation to the ECB’s climate agenda: we committed in July 2022 to “assess the macroeconomic impact of climate change and mitigation policies on inflation and the real economy”. vi  But being uncertain about the combined macroeconomic effects does not mean being passive or inert on action now. What we can already derive from these scenarios is a set of four firm convictions and prescriptions. 1. A shock that is global and certain >>> an orderly transition - First, climate transition entails structural changes to the global economy that are both universal and certain, with an overall and possibly negative supply shock that will generate frictions and costs in terms of the necessary reallocation of production factors.
Page 7 sur 8  The impacts of the climate transition could last throughout the decarbonisation of our economy. If we looked through it, we would overburden fiscal policy in cushioning these shocks. 3. Market alignment >>> signalling through Central Banks’ operations - Third, appropriate market incentives are necessary. This is where carbon pricing is needed, as I mentioned earlier, to align firms’ behaviour and private financing, but also (and maybe primarily) a fair pricing of climate risk on financial markets. This is where central bank operations and their greening have a key role to play, giving the right market signals and inducing changes. With Christine Lagarde, we at the ECB are already implementing a greening of our corporate sector purchase programme, as well as adapting our collateral framework. 4. Funding green investments >>> solvable through blended finance - Last but not least, if these conditions are met, the question as to how to finance investments is solvable. Different estimates have been computed, and their amounts may look impressive especially when presented in gross and absolute terms, for instance around EUR 500 billion per year in the EU until 2050. viii. However, when you consider net and relative financing needs, which represent between 2% and 3% of current GDP be it for the EU or France ix  Page 8 sur 8 according to the reports quoted, this turns out to be manageable.