Frank Elderson: We should aim for a 1.5 degree economy when designing the recovery path

Speech by Mr Frank Elderson, Executive Director of Supervision of the Netherlands Bank, at the OECD Committee on Financial Markets Webinar, 1 July 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

At the OECD Committee on Financial Markets, Frank Elderson shared his thoughts on a green recovery. "I fully realize that containing the pandemic has the highest priority right now. But as we consider the next stage of recovery, we must look beyond mitigating the immediate effects and think more strategically about how we recover. The economy should not only be rebuilt based on 1.5 meters but also on 1.5 degrees."

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Introduction

I am honored to open this session today. In the past 5 years, I gave more than 50 official speeches and even more informal presentations at numerous occasions, but I have never spoken in an OECD-setting. I am therefore very happy to make my debut here today on this important topic of resilient recovery.

It is still very much unclear how our economies will be affected over the longer term by the virus. We do not even know whether this will mainly turn out to be a demand or a supply shock, let alone that we can say something about the size of these shocks.

We are still far from the recovery phase. We just entered the phase in which many economies are slowly restarting. This exit will not be easy. It will be gradual, and might very well be of a two steps forward, one step back nature. The recovery path will very much depend on whether we are undergoing a temporary or permanent shock in the sense we need to adjust to a "1,5 meter economy".