Martin Wolf: “Putting a stop to growth is not the solution for climate change. Technology is the only way forward.”

Financial Times Associate Editor Martin Wolf and Bank of Spain Governor Pablo Hernández de Cos today took part in the eighth edition of the Energy Prospectives talk cycle organized by the Naturgy Foundation and the IESE Business School, opened by Naturgy Foundation Chairman Rafael Villaseca and IESE Dean Franz Heukamp.

During the workshop, Martin Wolf warned of the risk of inactivity in the face of climate change. “To keep the global temperature increase to less than 1.5ºC above the pre-industrial levels, emissions must be reduced 40% by 2030. If we do nothing, we risk a climate Armageddon”, said Wolf.

To fight this problem, the associate editor of the Financial Times noted that stopping growth is not a solution, saying the technological transformation is the only way forward, as it is enabling us to reduce the costs of clean alternative energy sources considerably. According to Wolf, the energy transition towards a decarbonised economy will continue to include fossil fuels that must maintain stable prices. “As we advance towards the new system, fossil fuels must continue to work, and there must be stability”, he said.

The Financial Times associate editor also highlighted the important role of the public administration worldwide, which must guarantee accurate regulation, promote incentives – such as offering temporary subsidies for new technologies or setting timelines for the gradual replacement of polluting vehicles – and in turn collaborate with the companies that will drive this transformation through investments.

Pablo Hernández de Cos, meanwhile, indicated that “the impact of climate change on the economy could come through various channels that affect businesses and homes and, subsequently, banks”, and he agreed with Wolf that technology is the primary solution. “The results indicate that the long-term benefits of the early adoption of policies that promote the transition to a carbon-neutral economy more than outweigh the short-term costs of that transition”, Hernández de Cos added.

“But climate change can also have quite a direct impact on the ability of central banks to stabilise inflation. Policies aimed at promoting the transition to a carbon-neutral economy, such as carbon taxes, will likely affect the volatility of general inflation, which includes energy prices”, said the Governor of the Bank of Spain, concluding that preventing climate change requires a holistic approach that involves all policies and stakeholders.

The workshop, held in Madrid, covered all the structural challenges facing society, such as climate and financial risks, energy transition and the future of the global and European economy. During the opening of this eighth session of Energy Prospectives, IESE Dean Franz Heukamp welcomed the speakers and thanked them for their participation, praising their quality and the importance of their discourse in contributing to a high-level discussion on the development of our society.

In opening the session, Naturgy Foundation Chairman Rafael Villaseca highlighted the significant interrelation existing between the energy sector, climate change and the financial and economic world. “With these sessions, the Naturgy Foundation, in collaboration with the IESE, hopes to contribute to a better understanding of the energy sector and the different challenges faced in the future from different perspectives”, he said.

Energy Prospectives is a series of high-level talks that brings together nationally and internationally renowned figures for their experience, vision and knowledge of the energy sector, as well as business leaders, regulators, executives and academics. This initiative is one the activities run by the Naturgy Foundation on energy and environment-related issues, based on serious and rigorous discussion that is essentially aimed at promoting rational uses of energy resources and encouraging sustainable development.