MADRID (Reuters) – Spain’s transition to cleaner energy could bring more notable risks to sectors with higher CO2 emissions, such as transport, manufacturing and agriculture, although any impact on banks would be moderate in the short term, it said. the Bank of Spain.
In an analysis of how rising CO2 emission rights prices may affect the banking sector, the central bank said on Wednesday that they would, on average, have a moderate impact on the credit quality of corporate loans.
However, if physical risks from climate change, such as droughts and wildfires, materialize strongly, that would increase the long-term likelihood of default for some households and businesses, he said.
The Bank of Spain added that the physical and transitory risks faced by banks could pose a threat to financial stability, which requires a “decisive” response from central banks.
At a time when European leaders are working on plans to accelerate the bloc’s green transition, the Bank of Spain’s chief economist, Ángel Gavilán, also said that internationally comparable standards needed to be created to achieve this goal.
He added that European plans to reduce their dependence on Russian energy after Moscow’s invasion of Ukraine were positive in the medium term, although they would hurt in the short term.
Without giving further details, Gavilán said the risk of the energy transition was expected to be inflationary in the short term.
Having included climate and environmental risks in its supervisory priorities for 2022-24, the European Central Bank is carrying out several climate-related supervisory activities this year, including its first climate risk stress test.
(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Andrei Khalip)
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