As the world prepares for crucial climate talks in Paris, Green MEP and economist, Molly Scott Cato, will today demand that Europe’s Central bank addresses the issue of the so-called ‘carbon bubble’. At a meeting with Mario Draghi, President of the European Central Bank (ECB), she will warn that tackling the carbon emissions responsible for climate change, whilst crucial, could affect the stability of financial markets. She will point to the fact that scientists say three-quarters of known fossil fuel reserves must be left in the ground if the earth is to stay within 2 degrees of warming. She will ask Mr Draghi for a clear plan to ensure that the carbon bubble is deflated, rather than left to burst, which she and other economists have warned would create havoc to the global financial system.
Dr Scott Cato said:
“We absolutely must get a successful outcome at COP21, one that will reduce global emissions so that the planet can keep within the critical 2 degrees limit. This means that we are moving beyond the era of fossil fuels which has serious implications for the value of fossil assets and the companies whose balance sheets depend on them.
“Last month Mark Carney made clear that the carbon bubble is now on the agenda of the Bank of England, but he also warned that Central Banks tend to operate with selective blindness, ignoring crucial issues until they become immediate and pressing. I will today ask Mr Draghi what progress has been made to assess and disclose the extent of over-valuation of fossil-related assets and ask what the European Central Bank is proposing to do to ensure there is a steady and orderly re-pricing of such assets, rather than a sudden and disorderly devaluation that could lead to serious financial instability.”