Emphasis On Energy Transformation From The ECB

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European Central Bank (ECB) President Christine Lagarde said that postponing the clean energy transition will further increase the price that will have to be paid. President of the European Central Bank (ECB), Christine Lagarde, spoke at the Energy Transition conference organized by the International Energy Agency (UEA), the European Investment Bank (AIB) and the ECB in Paris.

Pointing out that rapidly changing energy prices and permanent changes in energy markets may have significant effects on inflation dynamics, Lagarde emphasized that regular clean energy transformation is for the benefit of everyone.

Reminding that natural disasters have become more frequent and severe due to climate change, Lagarde stated that the number of weather-related disasters has increased 5 times in the last 50 years. “If we do the green transformation in the wrong way, there will be high social costs.” Lagarde stated that the energy crisis experienced in Europe last year revealed how vulnerable they are to fluctuations in energy prices.

Old ECB building with euro symbol in Frankfurt

“We Need To Avoid Procrastination”

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

Pointing out that not postponing climate targets will not reduce the cost of energy transformation, Lagarde commented, “Postponing energy transformation will further increase the bill we will have to pay.” Underlining that withdrawing climate targets will not provide more time for the necessary investment, Lagarde said that this will also increase price volatility.

“It Is Necessary To Strengthen Green Financial Markets”

Lagarde stated that the majority of companies in the Eurozone plan climate-related investments, but that companies face very high financing costs, and said, “There is a need to strengthen the green finance market in Europe, which will reduce the risk premium and reduce financing costs.”

Explaining that European companies find public guarantees for green investments insufficient, Lagarde stated that many investors are reluctant to finance green investments. Lagarde said the EU capital markets union should be completed to expand the investor base that European companies can access.

The Importance Of Price Stability

Explaining that the most important contribution that the ECB can make in this field is to ensure price stability, Lagarde said, “Price stability is very important for all kinds of fixed investments. Price stability allows companies to see how their costs will develop over time. For green investments, which generally do not provide returns for many years, prices are stable.” “It is even more important for him to stay,” he said. Lagarde explained that if there is no price stability, funds will turn to inflation-protected investments and investment in green technologies will decrease. Noting that the burden should be shared fairly in a smooth energy transition, Lagarde stated that the fiscal measures taken in Eurozone countries to limit high energy prices and support incomes contribute to controlling total inflation and reducing inequality

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