A strong carbon price is needed for ECB

The European Central Bank (ECB) published its first climate stress test, reaffirming the view that a strong carbon price is needed to remain aligned with the Paris Agreement global warming target and that banks must sharpen their focus on climate risk.

The report estimated in its worst-case scenario that rising natural disasters, particularly droughts and floods, coupled with sky-high energy prices could lead to a potential EUR 70 billion loss for the eurozone’s largest banks by 2030. Furthermore, the ECB warned that most eurozone banks have not yet included climate in their risk models.

The paper also underlines that a steady carbon price rise to around $300 in 2030, $600 in 2040, and $900 by mid-century, would ensure Europe moves towards net zero emissions by 2050 and mitigate the financial risks arising from severe climate shocks.

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