While the rising recognition of the hostile results of local weather change had led to some current actions that have been weakening the correlation between carbon emissions and GDP progress globally, an absolute decoupling was but to occur, Michael Debabrata Patra, deputy governor, Reserve Bank of India (RBI) mentioned on the New York Fed Central Banking Seminar organised by the Federal Reserve Bank, New York, on October 9, 2023 at New York, USA.
“Climate change can affect price stability through supply shocks such as food and energy shortages and through a decline in productive capacity. Demand shocks can arise due to the loss of wealth of firms and households on account of frequent natural disasters,” Dr. Patra mentioned.
“Physical and transition risks can affect the balance sheets of financial institutions and banks, limiting the flow of credit to the real economy. These destructive forces interact with each other to form vicious feedback loops,” he added.
Hence, nearly all nations have dedicated to timelines for the transition to internet zero emissions, with the bulk committing to attain this goal by 2050, the Deputy Governor mentioned.
While 23% of the nations have made the goal a authorized obligation, 18% have proposed to make it right into a authorized obligation and the remaining 59% have made their pledges in official coverage paperwork.
All these nations collectively account for round 73% of world CO2 emissions (59 nations have proposed actions or are in discussions), he instructed the gathering.
Pointing out that a number of central banks have expressed reservations about partaking with local weather associated points to keep away from mission creep, whereas others have expressed incapacity in view of missing the devices to take care of it, Dr. Patra mentioned the ominous actuality was that the local weather was hanging again.
“Central banks cannot be immune or inactive any longer,” he mentioned.
Emphasising that the earth’s local weather has “changed in the past, and quite drastically”, he mentioned as per findings in regards to the earth’s temperature during the last 500 million years launched by the Smithsonian National Museum of Natural History heat temperatures have been dominating more often than not, with world temperatures repeatedly rising above 26.6°C and even above 32°C — a lot too heat for ice sheets or perennial sea ice.
“In fact, polar caps cannot exist when the temperature crosses 18°C. This is the fever line. About 250 million years ago, it was too hot for even swamps to exist! In the last 100 million years, global temperatures have peaked twice. In fact, during much of the Paleocene and early Eocene epochs 55-56 million years ago, the poles were free of ice caps, and palm trees and crocodiles lived above the Arctic Circle,” he mentioned.
“About 60 million years ago, the earth’s climate changed dramatically due to the devastating impact of a large asteroid colliding with the earth, leading to the extinction of dinosaurs. However, one dinosaur survived — the theropod group, which included T-rex. It evolved into the birds that rule earth’s skies today,” he added.
Dr. Patra mentioned fashionable human civilisation, which had developed over simply the previous 10,000 years or so, had seen a interval of low temperatures and relative world local weather stability. Compared to many of the earth’s historical past, this era had been chilly at 14.8°C, often called the inter-glacial interval.
The earth’s temperature has begun rising. In September 2023 it averaged 16.4°C, 1.75 levels hotter than the pre-industrial interval of 1850-1900 (World Meteorological Organisation (WMO), October 2023)6. The warming up of the local weather can have cataclysmic penalties,” he cautioned.
On the steps taken by the RBI to deal with local weather change, Dr. Patra mentioned there was a rising recognition that even when governments have been probably the most influential company for local weather change, central banks and monetary sector regulators/supervisors have been going to change into the most important stakeholders as a result of monetary establishments play a key position in intermediation and therefore had a extra direct position in addressing local weather change; and local weather change was impacting the achievement of their mandates of value and monetary stability.
So in December 2007, the Reserve Bank mandated “Corporate Social Responsibility, Sustainable Development and Non- financial Reporting – Role of Banks” highlighting the significance of world warming and local weather change within the context of sustainable improvement.
In 2015, loans for era of renewable vitality and public utilities run on non-conventional vitality have been made a part of directed precedence sector lending by banks and in April 2021, the RBI joined the Network for Greening the Financial System (NGFS) to learn from and contribute to one of the best practices in local weather threat administration and inexperienced finance.
He mentioned in January 2022, the RBI performed a Survey on Climate Risk and Sustainable Finance to evaluate the standing of local weather threat and sustainable finance in main scheduled business banks and in January-February 2023, it issued sovereign inexperienced bonds value $2.2 billion (₹16,000 crore) in two tranches to mobilise assets for the Government for inexperienced infrastructural investments.
Besides this in April 2023, the RBI launched a “Framework for Acceptance of Green Deposits” from June 1, 2023, in order to handle local weather points.
Stating that although central banks typically pursued a comparatively slim mandate centered on stability and local weather change was actually not part of it, no less than until now, he mentioned but as extra proof amassed that local weather change was overwhelming the earth because of human exercise, they can not stay silent spectators.
“So, in the RBI we began from scratch and immersed ourselves in the economics of climate change. Uncharacteristically, we pooled all that we could gather on the climate and put it into our flagship publication, The Report on Currency and Finance. This is our small contribution towards a greener, cleaner India,” he mentioned.
“To conclude, climate change threatens to overwhelm the earth, but we can reverse it because we have induced it. The time to act is now on several fronts. Development and climate change are not necessarily pitted in a trade off – sustainable development is key. The climate is a global public good – global action is needed for humanity to live in harmony with our planet. And it is in our hands,” he mentioned