Frank Elderson: The green transition - benefits and barriers
Keynote speech by Mr Frank Elderson, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the 7th World Congress of Environmental and Resource Economists, Lisbon, 2 July 2026.
In my speech today, I will talk about two factors that have recently contributed to inflation volatility and economic uncertainty in the euro area: war in the Middle East and risks arising from the climate and nature crises. These factors themselves have a common cause: continued overreliance on burning fossil fuels and, in Europe's case, on imported fossil fuels in particular. Accelerating the transition to net zero carbon helps insulate Europe from these shocks. It is tempting, then, to say we can kill two birds with one stone. While that is not necessarily the most apt idiom to use at a congress of environmental economists, I also think it oversimplifies the task at hand. As I will discuss today, arriving at net zero carbon requires a complementary range of policies if it is to be delivered in an orderly and relatively low-cost fashion.
Costs of energy insecurity
Fossil fuels once again cast a pall over Europe's economic prospects at the start of this year, just a few years after the one caused by Russia's invasion of Ukraine. While the energy crisis triggered by the war in the Middle East has so far been less severe, it has pushed up oil prices again, threatened the supply of certain products and generated a substantial degree of uncertainty. Europe's continued reliance on imported fossil fuels makes the region especially vulnerable to such events.