Nobel Prize in Economics: “We must permanently tax fossil fuels”

He Nobel of Economics Robert Engle considers that the best strategy to face the climate change It goes through permanently taxing fossil energy, instead of subsidizing renewable energies, although it admits that European funds will generalize cheaper access to clean energy.

“Is more attractive to permanently tax fossil energy to make taxpayers pay with their taxes for the availability of green energy”says the American 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 Europe are in a position to permanently subsidize green energy”says the economist in reference to the billions of euros that are invested through the Next Generation program of the European Union to promote the energy transition.

The emeritus professor at New York University’s Stern School of Business says that “energy diversification is one of the reasons that have led to putin to invade Ukraine in such a devastating way (…), a war that is in fact accelerating efforts to decarbonise European economies”.

“Europe has realized in a very tragic way the importance of decarbonisation”says englewho during his lecture this week at the university went so far as to affirm that “Putin is a climate activist” who has accelerated decarbonization “with a catastrophic wartrophic”.

DECARBONISATION AS A RISK FOR THE FINANCIAL SECTOR

In his opinion, the business of fossil fuels is already in clear decline and warns that one of the risks of the decarbonization It is that it could cause a financial crisis due to the overexposure of banks to this type of asset.

engle He maintains that the 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.

It assumes that the benefits of the Spanish banks are produced in a market in which most mortgage loans are variable and are revised upwards, but argues that there will be other loans to companies and families 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

“The relationships between West and China they 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 move to deglobalize the entire world in a way that is going to be costly.”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.” holds.

(With information from EFE)