Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Ben Zeisloft.
European Central Bank Executive Board Member Isabel Schnabel contended that monetary policy should be used to accelerate the "green transition"
as Federal Reserve Chair Jerome Powell asserted the opposite.
The two policymakers presented their views on Tuesday during the Symposium on Central Bank Independence in Sweden. Schnabel remarked during her speech that the European Central Bank should align policy decisions with the goals established by the Paris Agreement.
"While governments need to accelerate their efforts to put the economy on a path towards net zero emissions, the drastic change in the macroeconomic and financial environment over the past year also requires central banks to review the scale and scope of their own contribution to the green transition,"
she told policymakers. "We will increasingly address climate risks in our risk control and collateral frameworks, including by eventually making climate-related corporate disclosures compulsory for bonds to remain eligible as collateral in our refinancing operations."
Schnabel said that the European Central Bank should consider "reshuffling the portfolio"
bond issuers, as well as "foster incentives"
for companies to reduce emissions. She added that "fiscal policy needs to remain in the driving seat and accelerate the green transition."
The remarks from Schnabel contrast with the approach advocated by Powell, who called on fellow central bankers to "stick to our knitting"
and not "wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities."
"Some analysts ask whether incorporating into bank supervision the perceived risks associated with climate change is appropriate, wise, and consistent with our existing mandates,"
he commented. "Addressing climate change seems likely to require policies that would have significant distributional and other effects on companies, industries, regions, and nations. Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public's will as expressed through elections."
The Federal Reserve has nevertheless introduced a number of programs in recent months to consider perceived "climate-related financial risks."
Officials unveiled an initiative with six American banks to examine various risk scenarios posed by climate change and revealed plans to work with the Treasury Department to consider the private sector's approach to purported climate risk. Democratic lawmakers have introduced a bill to incorporate social issues such as racial equity into the mandate of the Federal Reserve.
The European Central Bank has explicit objectives to "better understand, monitor, and manage climate-related risks,"
as well as "support an orderly transition to a carbon-neutral economy."
The Bank of England has likewise launched initiatives meant to help executives foster an economy with net zero emissions.
Central banks across the world are currently working to maintain price stability amid inflationary pressures that follow government lockdown mandates. An estimate from the International Monetary Fund said that global inflation was expected to reach 8.8% in 2022 before a decline to 6.5% in 2023 and 4.1% in 2024. Policymakers at the Federal Reserve raised rates by three-quarters of a percentage point on four consecutive occasions last year before implementing a half-percent increase last month, causing higher rates across the economy.