While the rising recognition of the antagonistic results of local weather change had led to some current actions that have been weakening the correlation between carbon emissions and GDP growth globally, an absolute decoupling was yet to happen, Michael Debabrata Patra, deputy governor, Reserve Bank of India (RBI) stated 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 stated.
“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 international locations have dedicated to timelines for the transition to internet zero emissions, with the bulk committing to obtain this goal by 2050, the Deputy Governor stated.
While 23% of the international locations 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 international locations collectively account for round 73% of world CO2 emissions (59 international locations have proposed actions or are in discussions), he advised 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 stated the ominous actuality was that the local weather was hanging again.
“Central banks cannot be immune or inactive any longer,” he stated.
Emphasising that the earth’s local weather has “changed in the past, and quite drastically”, he stated as per findings concerning the earth’s temperature over the past 500 million years launched by the Smithsonian National Museum of Natural History heat temperatures have been dominating more often than not, with international 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 stated.
“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 stated trendy human civilisation, which had developed over simply the previous 10,000 years or so, had seen a interval of low temperatures and relative international local weather stability. Compared to many of the earth’s historical past, this era had been chilly at 14.8°C, generally known as 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 stated 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 develop into the foremost stakeholders as a result of monetary establishments play a key function in intermediation and therefore had a extra direct function in addressing local weather change; and local weather change was impacting the achievement of their mandates of worth 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 growth.
In 2015, loans for technology of renewable power and public utilities run on non-conventional power 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 profit from and contribute to the perfect practices in local weather threat administration and inexperienced finance.
He stated in January 2022, the RBI carried out a Survey on Climate Risk and Sustainable Finance to assess the standing of local weather threat and sustainable finance in main scheduled business banks and in January-February 2023, it issued sovereign inexperienced bonds price $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 deal with local weather points.
Stating that although central banks usually pursued a comparatively slender mandate centered on stability and local weather change was definitely not part of it, at the least until now, he stated yet as extra proof amassed that local weather change was overwhelming the earth due to 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 stated.
“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 stated
