Isabel Schnabel: Never waste a crisis - COVID-19, climate change and monetary policy

Speech by Ms Isabel Schnabel, Member of the Executive Board of the European Central Bank, at a virtual roundtable on "Sustainable Crisis Responses in Europe", organised by the INSPIRE research network, Frankfurt am Main, 17 July 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The coronavirus (COVID-19) pandemic constitutes an unprecedented shock across many dimensions.

The lockdown has led to the temporary closing-down of many production sites. Global air and road travel have come to a virtual standstill. The effects have been so large and so disruptive that total carbon dioxide (CO2) emissions in 2020 will be about 4 to 7% lower than estimated before the crisis. In the past 120 years, there has never been an event that had such a dramatic impact on global CO2 emissions.

Yet, studies show that even the substantial restrictions in production and mobility that were necessary to contain the spread of the virus would not be sufficient to limit the global temperature increase to the 1.5 degrees Celsius above pre-industrial levels, as aspired under the 2015 Paris Agreement.

In order to meet that goal, according to the United Nations, global emissions would need to drop by 7.6% each year between 2020 and 2030. Given the economic and social hardship associated with this year's reduction, such a drop is hardly feasible by simply reducing economic activity.

The pandemic is therefore a stark reminder that preventing climate change from inflicting permanent harm on the global economy requires a fundamental structural change to our economy, inducing systematic changes in the way energy is generated and consumed.