ECB: Lagarde warns: “Costs of climate change are rising and shocks may be more difficult to absorb”

The consequences of climate change and their impact on financial and price stability are very important to Lagarde. Before the start of the World Climate Conference, she made an appeal to politicians.

Berlin. In view of the heat wave, ECB boss Christine Lagarde warns of the consequences of climatic changes. “The costs of climate change are rising and future shocks may be harder to absorb,” she said in a post on the ECB blog website published on Wednesday.

“Extreme heat will return more frequently and with greater force, and the consequences will hit hardest those least able to withstand it,” Lagarde writes. Europe has the means to counteract this development. We owe it “to the generations who have to live with these summers”.

The consequences of climate change are very important to Lagarde. Under her leadership, the central bank has more closely integrated the influence of climatic conditions into its monetary policy and banking supervision on several levels, particularly with regard to price and financial stability. This is controversial among experts. Critics are of the opinion that the central bank is exceeding its mandate.

Lagarde's entry comes shortly before the start of the World Climate Conference in Turkey. The head of the ECB is calling for greater efforts by the international community to protect the climate. “The COP31 summit in Antalya, starting next week, provides an opportunity to turn ambition into action around the world,” she said.

In her blog entry, Lagarde points out that the energy price shock caused by the war in the Middle East coincided with the heat this summer and that both factors influenced each other. Heat waves and drought increased the price pressure caused by the conflict.

Lagarde explains the connections as follows: Demand for electricity increased as consumers and companies increased their use of air conditioning. At the same time, low water levels reduced hydroelectric power generation, and a limited supply of cooling water due to water shortages limited the capacity of nuclear power plants. “Together, these factors led to an increase in wholesale electricity prices and reduced the ability to offset higher fossil fuel prices with renewables and nuclear power,” Lagarde concluded.

The ECB President announced last week that she would step down early from the top of the ECB. She justifies this with the desire to be able to speak freely and express her thoughts freely. This is not possible in the role of head of the Euro Central Bank. Details about her professional future are unknown.