08 November 2019

Financial Times: Central bankers are not climatologists

The challenges to a green energy transition do not principally come from shortcomings in central bank policy, writes John Dizard. Parsing and revising climate-based financial markets risk measures or providing marginally subsidised liquidity for green bonds and similar securities won't do the trick.

There is indeed a huge gap between required carbon emissions reductions and the industrial and infrastructure base needed to make that happen. But that is created by political, engineering and supply chain issues, not a lack of box-ticking by financial consultancies. So far the public’s conception of a “crisis” has more to do with their lights going out than what is happening to Arctic sea ice.

The problems that have accompanied aggressive renewable energy deployment in California, Germany, Australia, Hawaii or elsewhere had nothing to do with whether the Federal Reserve, the European Central Bank or the Reserve Bank of Australia had sufficiently strict requirements for reporting climate risk or accepted enough green bonds as collateral. Rather, they were created by a lack of green, or even greenish, back-up generation and the relatively slow development of transmission systems compared with the short deployment times possible for wind or solar. Those problems could have been foreseen, but climate activists and developers wanted to skip over the challenge of explaining them to the public and developing a truly integrated green energy plan. So now you have diesel generators in California, coal in Germany, energy prices higher than they should have been, and widespread cynicism feeding populist politics.

Full article on Financial Times (subscription required)

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