The president of the Central Bank, Roberto Campos Neto, stated this Saturday (9) that there are clear signs that the cost of the green transition has been underestimated. He assessed that climate events are growing exponentially and argued that the energy transition needs to be carried out in a coordinated manner.
“The green transition is proving to be much more costly, as we saw here, and the inputs needed for this have also proven to be more inelastic than we expected,” said Campos Neto, during the event Green Swan 2024carried out by the Bank for International Settlements (BIS), in Basel, Switzerland.
“So I think innovation is proving to be much more difficult and also much more difficult to model than we expected.”
According to him, compared to issues related to the environment during the 2008 crisis and the Covid-19 pandemic, there is clarity that, after these episodes, people began to demand that growth be more sustainable and more inclusive.
Campos Neto also stated that green investments are more sensitive to monetary policies. But he highlighted the difficulty of including this scenario in economic models, especially in the midst of positive externalities.
“When we look at how to model these things, it’s very difficult not to think about positive externalities,” he said. Regarding externalities, he cited some examples.
In the case of companies, there is always the issue of reputation involved when opting for sustainable investments, such as those related to carbon credits. In this case, according to Campos Neto, the decision to invest is not clear and research reveals this.
On the consumer side, the replacement of green products with non-green products is also not so obvious, according to him.
“If you look at the protein market now, people pay more for protein if it has a green or sustainable label and are less price sensitive. Now, we have a big change in the price of protein in Brazil, you can clearly see that”, he stated.
Campos Neto also highlighted the difficulty of modeling issues related to carbon taxes. According to him, it would be easier to adapt this theme into the model if it were possible to assume that all countries have the same tariff policy on carbon emissions – which does not happen in practice.
“It doesn’t happen that way because, in Europe, you have border tax adjustments. In some other countries, no. So when you impose taxes, it really changes the incentives from countries that have border tax adjustments to countries that don’t. This is also very relevant,” he said.
