ECB Welcomes EC Proposals to Support Climate Change Mitigation
In response to a letter from certain members of the European Parliament, the European Central Bank (ECB) welcomed the recent proposal of European Commission on the “Fit for 55” package. This comprehensive package aims to support climate change mitigation through a wide range of policy elements, including enhanced carbon pricing and improved energy efficiency. Among other things, a more realistic carbon price is expected to set better incentives and foster a surge in innovation and investment, which is indispensable for a timely and cost-efficient transition to a carbon-neutral economy. Building on its previous analysis of the implications for the economy of climate change and related policies, ECB plans to take a careful look at the individual elements of the “Fit for 55” package.
The Fit for 55 package is a set of proposals to revise and update European Union legislation and to put in place new initiatives with the aim of ensuring that EU policies are in line with the climate goals agreed by the Council and the European Parliament. "Fit for 55" refers to the at least 55% emission-reduction target, which the European Union has set for 2030. The proposed package aims to bring the climate and energy legislation in line with the 2030 goal. The European Commission presented the package on July 14, 2021. ECB will assess how and through which channels the individual elements of the "Fit for 55" package are likely to affect the euro area economy. While existing evidence suggests that the effects of climate change and the transition to a carbon-neutral economy are likely to be substantial, there is considerable uncertainty regarding the channels through which these would have an impact on the euro area in general and inflation developments in particular. The impact on inflation is likely to be both direct and indirect, affecting not only the level of inflation but also its seasonality and volatility. For example, inflationary pressures could emerge from higher carbon prices and from firms passing on to customers the higher costs they incur in having to become more environmentally friendly or having to adapt their business models. Conversely, prices for renewable energy sources may decline further over time if more efficient technologies are developed.
The letter also highlights that ECB is committed to increasing its contribution to addressing climate change in line with its mandate. The new Climate Change Center of ECB will contribute to shaping and steering the climate agenda of ECB; this includes the analysis of the impact of European Union policies such as the “Fit for 55” package. The results of these analyses will be communicated in due course.
Related Links
Keywords: Europe, EU, Banking, Climate Change Risk, Transition Risk, Carbon Neutrality, European Green Deal, Fit for 55 Package, ESG, Carbon Pricing, ECB
Previous Article
BIS and Central Banks Report on Progress Made in Area of CBDCsNext Article
EIOPA Sets Out Approach for IBOR Transition in EURelated Articles
BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance
The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.
US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
EBA Issues Guide on Bank Resolvability, Consults on Transferability
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.
HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
FCA Registers Securitization Repositories; PRA Issues 2022 Priorities
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
EC Regulation Sets Out Methods for Measuring K-Factors Under IFR
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
BIS Studies How Platform Models Impact Financial Stability & Inclusion
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
CBE Issues Additional Measures to Ease Disruptions from Pandemic
The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.
ESAs Publish List of Financial Conglomerates for 2021
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
