All is proceeding according to plan.
From the European Central Bank:
Remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at a panel on “Climate and the Financial System” at the American Finance Association 2022 Virtual Annual Meeting
Frankfurt am Main, 8 January 2022
In 2021 the global economy was shaken by a major energy crisis. Prices for oil, gas and electricity surged as our economies reopened after the shutdowns imposed in response to the coronavirus (COVID-19) outbreak.
Though last year’s events were extraordinary on many levels, spikes in energy prices are a common phenomenon. Since the 1970s, sharp movements in energy prices have been a recurring source of economic dislocations and volatility.
And yet, the roots of today’s shock are likely to go deeper. While in the past energy prices often fell as quickly as they rose, the need to step up the fight against climate change may imply that fossil fuel prices will now not only have to stay elevated, but even have to keep rising if we are to meet the goals of the Paris climate agreement.
In my remarks today, I will discuss the challenges that such prospects pose to both fiscal and monetary policymakers in an environment in which the supply of cheaper and greener sources of energy will only gradually be able to meet rapidly rising demand.
I will argue that governments will need to push the energy transition forward, while at the same time protecting the most vulnerable members of society from energy poverty.
Central banks, in turn, will have to assess whether the green transition poses risks to price stability and to which extent deviations from their inflation target due to a rise in the contribution from energy to headline inflation are tolerable and consistent with their price stability mandates.
I will explain that there are instances in which central banks will need to break with the prevailing consensus that monetary policy should look through rising energy prices so as to secure price stability over the medium term.
Fast rise in carbon prices helps accelerate the green transition
The world economy will have to undergo a far-reaching transformation to be able to live up to the Paris agreement to limit the increase in the global average temperature to 1.5° Celsius above pre-industrial levels.
At the heart of these efforts is the need to radically cut greenhouse gas emissions.[1] According to the United Nations, global emissions would need to drop by 7.6% each year between 2020 and 2030 to reach the Paris target.[2] By way of comparison, in 2020, when global economic activity came to a virtual standstill, emissions fell by only 5.8%.[3]
There is broad agreement that meeting these ambitious targets requires putting a global price on carbon, and it requires doing so swiftly.[4] At present, only 21.5% of global emissions are covered by carbon pricing instruments and only 4% are covered by a price of more than USD 40.[5]
According to a recent survey, most climate economists think the price of carbon should be above USD 75 to reach net zero emissions by 2050.[6] The median response of USD 100 is consistent with what Nicholas Stern and Joseph Stiglitz recently estimated to be the carbon price in 2030 necessary to achieve the goals of the Paris Agreement.[7]....
....MUCH MORE
She pretty much lays it all out right there. As with European carbon, it appears that we have an upwardly moving market price created by rules and regs. If the above doesn't communicate what has been decided let's try:
Got a good reason for taking the easy way out
Got a good reason for taking the easy way out now
She was a day trader, one way ticket yeah
It took me so long to find out, and I found outShe was a day trader
One way ticket, yeah
—apologies to Sir Paul McCartney and the literary estate of John Lennon
We have achieved the dream of HODLers throughout history, a market that only goes up.
