European Central Bank climate report: Early action is better
ABC News
The European Central Bank has carried out its first climate change stress test
FRANKFURT, Germany -- The European Central Bank's first climate stress test shows higher risks of loan defaults for banks in fire-plagued southern Europe and argues that an earlier and orderly shift to greener energy may have costs — but pay off for the economy over the long run.
The bank warned that its two more negative scenarios — a hasty effort to catch up to the problem or simply doing nothing — risked much higher costs and losses in economic output, especially further in to the stress test's 30-year time frame.
The stress test published Wednesday compiled data gathered on more than 4 million companies worldwide and 1,600 banks in the 19-country eurozone where the ECB sets monetary policy. It probed the impact on economic output and bank finances under three scenarios: an orderly transition where measures to limit emissions are taking in time, a disorderly scenario where measures are taken late, and a final “hot house world” scenario where things stay as they are.
The broad takeaway was that an orderly and swift transition “to minimize costs and maximize benefits outweighs short-term cost of transition to zero-carbon economy over the medium to long-term.” It called a more aggressive approach to energy transition “a golden opportunity” because the long-term advantages outweigh the initial costs.
