Matilde Martinez |
Madrid (EFE).- Nobel Prize winner Robert Engle believes that the best strategy to deal with climate change is to permanently tax fossil fuels, instead of subsidizing renewable energies, although he admits that European funds will generalize more access cheap to clean energy.
“It is more attractive to permanently tax fossil energy than to make taxpayers pay with their taxes for the availability of green energy,” Engle said in an interview with EFE during his stay in Madrid, invited by the Universidad Pontificia de Comillas to talk about sustainable finance.
“I don’t know if you in Europe are in a position to permanently subsidize green energy,” says the economist, referring to the billions of euros that are being invested through the European Union’s Next Generation program to promote the energy transition.
The emeritus professor at New York University’s Stern School of Business assures that “energy diversification is one of the reasons that led Putin to invade Ukraine in such a devastating way (…) a war that is actually accelerating the efforts for the decarbonisation of European economies”.
“Europe has realized in a very tragic way the importance of decarbonization,” says Engle to EFE, who during his conference this week at the university went as far as to affirm that “Putin is a climate activist” who has accelerated decarbonization “with a catastrophic war.”
Decarbonization as a risk for the financial sector
In his opinion, the fossil fuel business is already in clear decline and he warns that one of the risks of decarbonization is that it could cause a financial crisis due to the overexposure of banks to this type of asset.
Engle says that central banks are pending a problem that worries him but does not worry him, because he assures that “it was more worrying during the pandemic than right now.”
“During the pandemic, when oil and gas companies were under a lot of pressure from falling demand, part of the fall in bank shares and their bank revenues was due to their lending to the oil and gas sector. ”, explains the professor, who was awarded the Nobel Prize in 2003 for his time series analysis method used to prevent financial risks.
Engle points out that banking has already recovered from that and shows a better evolution in the markets than other sectors.
Regarding the decision of the Spanish Government to tax the banks for the extraordinary profits derived from the rise in interest rates, he does not believe that it is a correct strategy, although he acknowledges that the situation of the banks in Spain has nothing to do with that of the United States Joined.
He assumes that the benefits of the Spanish baca occur in a market in which most mortgage loans are variable and are revised upwards, but he argues that there will be other loans to companies and households at a fixed rate whose value decreases when interest rates of interest go up.
In his opinion, raising interest rates is the way to contain high inflation “which is not only caused by high energy prices.”
China as a geopolitical risk factor for the economy
“Relations between the West and China are also much more difficult than they used to be and there is some pressure not only to decarbonize economies, but also to deglobalize them (…) Part of the inflation comes from our movement to deglobalize the entire world in one So it’s going to be expensive,” he argues.
“China needs more aggregate demand to support its economy. The United States and Europe need less aggregate demand because they have high inflation. There are many reasons to think that if we could just get along, we would solve both problems, but that seems like a difficult road,” says Engle.