Signe Krogstrup: Financing the energy transition

Speech by Ms Signe Krogstrup, Governor of the National Bank of Denmark, at Nordea's 11th Annual Nordic AAA Seminar about financing and the energy transition, Copenhagen, 11 May 2023. 

Central bank speech  | 
11 May 2023

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Many thanks to Nordea for inviting me today.

You might question the relevance of discussing climate change and financing the transition amid inflationary pressures and banking turmoil.

I would argue that these phenomena are intimately connected.

Climate change and the needed energy transition have contributed to the supply-driven energy price volatility, which has been a primary driver of the current high levels of inflation in Europe.

  • Climate considerations were a key factor underlying the growing dependence on Russian natural gas in Europe prior to the invasion of Ukraine.
  • A higher proportion of renewables in the energy mix in Europe means that the energy supply, and hence energy prices, have become increasingly sensitive to heat, drought and lack of wind, as we experienced last summer.
  • While we have no counterfactual, it is likely that the European energy mix, and thus inflation and interest rates, would have developed very differently in the absence of global warming.