Reserve readies for climate change risk
Keeping a step ahead of Prime Minister Scott Morrison's pivot on net zero emissions, the Reserve Bank has been working up climate transition scenarios.
Mr Morrison will face pressure when he attends a US climate summit of large emitters on April 22, where the Biden administration aims to raise the stakes in climate ambition after rejoining the Paris Agreement.
For now, the central bank is still focused on the Paris goal to limit global warming to well below two degrees, and "preferably" 1.5 degrees.
Deputy governor Guy Debelle met with bank bosses earlier this week to share scenarios being developed with CSIRO as part of work by regulators on the vulnerability of the banking system.
"We're in the process of pinning down scenarios we want and looking to have that work done by mid-2021 to start implementing that," Mr Debelle told a parliamentary committee hearing.
"The banking sector is pretty heavily engaged. They're not starting from scratch."
As a member of the Network for Greening the Financial System since 2018, the Reserve Bank is part of a group of central banks examining physical and transition risks posed by climate change and the impact on the financial stability of banks.
Energy markets are also in transition, locally and globally.
For Australia, the impact on the thermal coal industry is front of mind, politically and economically.
Mr Debelle said the direct effect of a decline in thermal coal exports was "gradual and fairly small" but particular communities would be affected more than others.
"Their energy demand is still going to be there, the question is how is that going to be supplied."
Mr Morrison this week declared his support for achieving net zero emissions by 2050, or sooner, to be achieved through technology not taxes.
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