A disorderly or incomplete transition to net-zero carbon emissions poses a major risk to the global financial system, European Central Bank chief economist Philip Lane has said.
“Globally and country by country, if we have clear and steady transition plans between now and 2030... then the implications at a macro level are relatively low,” he told the Dublin Climate Dialogues conference.
“A lot can happen, the world can adapt, markets can reallocate, sectors can adjust... it’s a big programme of work but we can get through that work,” Prof Lane said.
However, if the transition is delayed or incomplete, “it means that we’re storing up a bigger adjustment for later on... then it becomes more of a macro risk factor.”
Addressing the same conference, which is exploring how global climate action can be scaled up ahead of the COP26 UN summit in November, climate scientist Prof Katharine Hayhoe said, left unchecked, there was a risk the climate crisis would eventually trigger similar recessions to that caused by the Covid pandemic on a yearly basis.
Fossil fuels were linked to nine million premature deaths a year, three times the number of Covid deaths, and in a scenario where scientists were unsure about longer-term implications for the planet. “All we can say is the further and faster we push our planet, the greater the risk of some truly nasty surprises,” she said.
It was a message reinforced by US climate envoy John Kerry, who told the virtual conference: "The truth is we're not just getting the job done – yet. Currently, if you did everything we said we would do... we're still going to see warming of about 3.7 degrees or more. So the fact is we have to strive even harder, urgently, to hold the warming of the globe to the 1.5 degrees."
While the task was beyond individual governments and would require many trillions of dollars in private funding, he stressed it offered opportunities the extent of which he had not seen over the course of his political life.
Dialogues chair Pat Cox said the gathering had identified policy and climate finance issues needing to be addressed at COP26. After the event concludes on Thursday, the Dublin Climate Declaration will be handed over to the UK government, which is hosting COP26.
Paying tribute to the prime minister of Barbados, Mia Amor Mottley, Mr Cox said she cut through a lot of what could be the fog at COP26 when she said: "I don't want bragging lists; I want some realistic strategies."
“That was a real cri de coeur – a frontline state one disaster away from potential extinction,” he added.