Oireachtas Joint and Select Committees

Wednesday, 24 November 2021

Committee on Budgetary Oversight

Inflation: Discussion (resumed)

Mr. Gabriel Makhlouf:

The key is in the word "sufficient". I suspect that we will never be able to do sufficient economic modelling but I am pretty sure we can do a lot more and better economic modelling as we gather more and better evidence and develop better understanding. The ECB's position on climate change, which I endorse 100%, is that it is probably the single most significant change to the way economies work in the future. We reviewed our entire strategy and concluded the review last July. We decided as part of that review to have a specific climate change action plan, which is pretty comprehensive. Fundamentally, it is about understanding what changes will happen to economies and the implications of those changes for the way economies work and, therefore, the job we have at the ECB, which is to maintain price stability. It obviously has implications for financial stability among other things. I told colleagues at the Central Bank yesterday that if we are going to achieve zero emissions by 2050, and 2050 is less time away than when Jack Charlton took the team to Italia 90, and fundamentally change our economy to achieve net zero, it will involve significant change. I do not know what that change will be. I can see it happening around me. It is not that long ago that the notion of buying an electric car was slightly ridiculous because it could only travel 100 metres. This is changing and changing very fast.

However, that sort of change will have to be comprehensive across economies if the net-zero emissions target is to be met. It will have implications for the way the ECB works, understands the economy and sets interest rates and monetary policy.

It is a significant area of work for us. Just a couple of weeks ago, I wrote to the chairman and chief executive of every regulated financial service provider saying that the Central Bank had certain expectations of how they would manage climate change risk and that it was something on which we would focus. I also told them that we were going to set up a climate change forum because many of these challenges are new and we need to work on them together with as many players in the economy as possible. I am glad that this committee is thinking about the medium to long term because these are significant issues for everyone.