ECB President Lagarde: If the energy transition is postponed, the bill will increase

The president of the European Central Bank (ECB), Christine Lagarde, said that postponing the transition to clean energy will further increase the price that will have to be paid.

Lagarde spoke at the Energy Transition conference organized by the International Energy Agency (IEA), the European Investment Bank (EIB) and the ECB in Paris.

Noting that rapid changes in energy prices and permanent changes in energy markets can have significant effects on inflation dynamics, Lagarde emphasized that the regular transformation to clean energy benefits everyone.

‘INCREASED 5 TIMES IN 50 YEARS’

Recalling that natural disasters have become more frequent and severe due to climate change, Lagarde stated that the number of climate-related disasters has multiplied by five in the last 50 years.

“If we do the green transformation wrong, there will be high social costs,” Lagarde said, adding that the energy crisis experienced in Europe last year revealed how vulnerable they are to fluctuations in energy prices.

Lagarde emphasized that for the energy transition to occur more regularly it is necessary to avoid delays, understand the difficulty and share the burden fairly.

Lagarde noted that not postponing climate goals will not reduce the cost of the energy transformation, commenting: “Postponing the energy transformation will further increase the bill we will have to pay.”

Underscoring that withdrawing climate targets will not give more time for the necessary investment, Lagarde said this will also increase price volatility.

‘FINANCIAL COSTS ARE TOO HIGH’

Lagarde stated that most companies in the eurozone plan climate-related investments, but that companies face very high financing costs, and said: “It is necessary to strengthen the green finance market in Europe, which will reduce the premium of risk and will reduce financing costs.” he said.

Lagarde explained that European companies consider public guarantees for green investments insufficient and stated that many investors are reluctant to finance green investments. Lagarde said the EU capital markets union should be completed to broaden the investor base that European companies can access.

EMPHASIS ON ‘PRICE STABILITY IS IMPORTANT’

Lagarde explained that the most important contribution that the ECB can make in this field is to guarantee price stability: “Price stability is very important for all types of fixed investments. Price stability allows companies to see how their costs will evolve over time. “For green investments, which often do not give returns for many years, it is even more important that prices remain stable.” saying.

Lagarde explained that if there is no price stability, funds will be directed to inflation-protected investments and investment in green technologies will decrease.

Noting that the burden must be shared fairly in a smooth energy transition, Lagarde said fiscal measures taken in eurozone countries to limit high energy prices and support incomes contribute to controlling overall inflation and reducing inflation. inequality. (AA)