Rachel Glennerster Photo: the press service of the British Embassy

Rachel Glennerster, the chief economist of the British Foreign Ministry, is responsible for ensuring that foreign policy is supported by economic analysis. In May, she had a virtual visit to Russia, and one of the main issues under discussion was the transition to the green economy. This topic is one of the priority for the UK, given that in November, the UN conference should be held in the Glasgow to change the climate COP 26, transferred from last year due to pandemia.

With representatives of the Bank of Russia, Glennerster, in particular, discussed the risks associated with the world economy and climatic changes. About how the central banks can take into account the influence of environmental factors on the stability of the financial and economic system; Why do you need a cross -border carbon collection; Is it worth it to diversify their business to oil companies; Why the Russian economy does not grow as its “amazing human capital” allows; Can the current jump in prices affect people's psychology and develop into stable inflation expectations, ”Glennerster said in an interview with VTIMES .

How to help climate center

- After the relations between our two countries worsened for more than one year, and while other Western countries and Russia send each other's diplomats, the UK activates contacts. Over the past six months, you are the third representative of the British Foreign Ministry who visits Russia physically or virtually, leading negotiations with Russian colleagues. What caused such activity and what areas it is directed to?

- We try to maintain relations with Russia in the economic, scientific, research fields. Russia can play an important role in the fight against climate change, and we consider this sphere extremely important, especially since this year we spend COP 26. Russia takes fourth place in the world for carbon dioxide emissions. At the same time, its forests are a major CO2 absorber, but there are also potential serious problems with the merciful mercantis, etc. We have close economic ties in this area, since British oil and gas companies operate in Russia. For us, this is an important area of interests, and we urge Russia to set more ambitious goals within the framework of the Paris Climate Agreement.

I talked with colleagues from the Bank of Russia, we have a good relationship with them. We discussed the risks associated with the global economy and, again, with climatic changes. Mark Carney, the former chairman of the Bank of England (before leaving this post, at the beginning of 2020 he was appointed special envoy of the UN to combat climate and finance change. - VTIMES ), worked a lot with the Central Banks around the world, discussing how to take into account climatic changes when evaluating the risks in the financial and corporate sectors and ensure transparency in this matter.

- Recently, several initiatives have been presented on the accounting of climatic risks in the policy of the Central Bank. What specific steps did you discuss with the Bank of Russia?

- As with the Central Bank of other countries - what a standard set of tools should be, how to ensure transparency, that is, to stimulate the companies to report climatic risks so that banks can take them into account when lending and investments and report them. One important area - regulatory requirements are needed that would determine what the companies should include in the reporting of these risks. The other is the stress tests that the Central Bank should be carried out to assess the consequences of climate change, considering different scenarios. The Bank of Russia perfectly conducts stress tests taking into account the change in hydrocarbons-this is one of the main risks for Russia. But there are others, for example, the increased probability of natural disasters. The Russian Central Bank carefully analyzes this topic, which is fine, and we conducted a fruitful discussion according to its technical aspects.

- Many major institutional investors say that they will analyze their portfolios and work with companies, convincing them to set goals to reduce emissions and develop strategies to achieve them. Should the Central Bank stimulate such activities of companies?

- Identification of risks and informing about them is the first step. And it becomes more important that many investors, as you said, pay more attention to this issue: they now need such information for decision -making on investments. The Central Bank cannot tell investors not to invest in some companies, but they can, with the help of regulatory requirements, contribute to the disclosure of information, and at some point to say: “If you do not take climatic risks in the calculation, we believe that this threatens your stability and you need to ensure the sufficiency of capital that would confront them.” That is, in order for the Central Bank to be able to realize their powers to ensure macroeconomic stability, they must create financial incentives to take into account such risks, including through the formation of additional capital.

- There are also proposals to the Central Bank to change the rules for receiving a pledge. For example, give preference to green bonds, taking bonds in provision in transactions with commercial banks, or reduce the collateral value of assets with a higher intensity of carbon dioxide emissions.

- I would like to first pay attention to another moment. The main thing is that now you need to do with green bonds is to develop general criteria for them and coordinate them. A big problem with green financing is to determine that it is greenhouse (i.e., the presentation of the tool as green mainly for marketing purposes.- VTIMES ) or raising funds to a truly clean project. This is an area requiring the adoption of classic regulatory measures.

Central Banks can do a lot, but, admitted, not all. If the Central Bank is alone to try to transfer the economy to green rails, it will not go far. Other government departments will better cope with some tasks. Therefore, I urge the Russian government to participate in the current changes and try to resolve the issues that they give rise to. Should the Central Bank make its investments and operations completely green? Someone will argue that this goes beyond his powers, and I will say: it is much more important that he does not act alone, we need a larger strategy.

What to do with hydrocarbons

-In May, the International Energy Agency (IEA) called for investment in new oil and gas projects if the world wants to achieve the goal to reduce the NEC-EXTRESS CO2 to zero by 2050. In Russia and the UK, a fairly large oil sector. How do you evaluate the IEA position?

- The UK as a state itself does not invest in an oil industry. But we decided to stop supporting hydrocarbon projects abroad, including through our export financing organizations. We also discuss such steps with international financial organizations. I think that gas in a number of places will maintain its value as transition fuel. The situation with oil is much worse, and with coal - even worse. We make great efforts to stop using coal, and call for other countries to this. Coal is very harmful for climate and health.

-We all remember the films shrouded in Smog London half a century ago.

-My mother told how she was traveling on a bicycle and because of a smog did not see his steering wheel. But the coal in London stopped burning, and the city eventually got rid of Smog. Today, we have evidence of how large the number of uninhabited years of life due to air pollution in which coal has made a huge contribution. The gas is much cleaner, and it will ensure the transition to renewable energy.

- BP has adopted a strategy to reduce carbon dioxide emissions and diversification in favor of renewable energy sources. But, being a major shareholder of Rosneft, she does not raise the question of her plans to continue to actively produce oil, including through the development of a large deposit in the Arctic. How does the British government relate to this?

- I would pay attention to what important point. It seems to me that Russian oil companies should diversify (as BP does) not only because it is important for peace and climate, but because in their own interests to reduce risks. If you work in the same sector, from which the world is trying to get rid of, this is a very bad choice in terms of business. I would strongly advise Russian companies, as well as BP, to invest taking into account the long -term prospects. Of course, I will not say BP , what kind of investment she should do, but we must all put pressure on such companies so that they think about our actions. And BP, it seems to me, reacts to this pressure.

The government acts through regulation, taxation, issuance of licenses. Therefore, the Russian government must decide whether to issue licenses for work that cause damage to nature. At the same time, I repeat, the companies themselves should take into account the purely economic factors associated with climatic risks.

- How do you evaluate the investment climate in Russia?

- Statistics on trade between Russia and Great Britain are quite good. But, of course, Russia can do a lot to increase its attractiveness for international and even internal investors. Many told me: in Russia we prefer growth stability. And statistics confirm this. The pace of economic growth is not very high and not the same as they should be, given the fantastic human capital of your country. This just allows you to evaluate the level of confidence of investors, their expectations as to whether they can freely develop their business, whether it will expropriate it, whether the government will allow them to work.

Russia is not developing as dynamic as it should, given your stunning human capital. Its growth is below the potential.

Carbon incentive

- The EU is preparing to introduce a cross -border carbon collection. What is its meaning?

- Climate change is a global problem, and countries can take actions to solve it separately, and may also try to stimulate other countries to take part in this. And a cross -border carbon collection is aimed at this. This is an attempt to use taxes and incentives to move other countries on actions to combat climate change. The absence of such actions can harm us all. But there is still a lot of effort to understand how to understand how this mechanism can work and how to use such incentives correctly. Technically, it is very difficult to apply them to individual products, so you need to develop general approaches that should not violate the Rules of the WTO.

- The collection can negatively affect countries in which there is no system of trading emissions of CO2. In Russia, it is not, in the UK - there is. Can the introduction of such a gathering or plan to introduce it to create an international system of trading emissions instead of heterogeneous national systems?

- The concentration of resources on solving a certain problem can give a good result, and the international system trading system would help to achieve it. But, on the other hand, its creation is associated with numerous difficulties, so the countries should not wait for the appearance of such an ideal system and do nothing. Each country should act, and as we move, we will try to coordinate these actions. This is precisely the positive consequence of the introduction of a cross -border carbon fee: the national system will stimulate other countries.

Hot topic for discussion

- Before the pandemic, the main measures to stimulate the economy were taken by the Central Bank, now the governments adopted the relay wand. What do you see a post -shoe economy? What role does a fiscal and monetary policy play in it?

- It depends on the situation in each particular country. Many countries stimulated the economy with the help of large -scale and universal budget infusions. But the pandemic influenced countries and groups of the population. Somewhere the poor suffered the most strongly, for someone, on the contrary, savings have grown a lot. Budget policy can just help align the situation. The economy is restored in many countries, but for some groups of the population, the long -term consequences of the crisis were more difficult, so you can use budget funds for the targeted support of such groups. But the scale and specific details of such support, of course, depend on what stage of recovery the economy of a particular country is located. Many economies have not even left the crisis, while others can soon reach a pre -crisis level.

- During the pandemic, public debt grew strongly, especially in developed countries. In some of them, the central banks now actually monetize the public debt. Some of the economists believe that this is correctly and a careful budget policy should be left in the past, because the current situation is very different. Others scare that in the end this will lead to catastrophic consequences, including hyperinflation. How do you assess the situation and risks?

- Different countries have a very different debt level. The general lies in the fact that interest rates in the world as a whole are very low, so the cost of servicing debt is much lower than in the past. This is a very important factor when you estimate the level of country debt. Of course, there is a risk of increasing interest rates and along with it - the cost of servicing this debt. This, of course, must be remembered, it should not be calculated that real or even nominal rates will always remain at such a low level. But you also need to understand: when such a shock occurs once at half a century or in the century, the task of the governments is to soften it and duty is one of the tools for this. This is absolutely normal. Does this mean that we no longer should worry the level of debt? No. Of course, you need to think about risks, benefits and costs.

- Is there a risk of significant acceleration of inflation and the fact that the Central Bank will hesitate for too long with the tightening of monetary policy?

- This is now a hot topic for discussion among economists. Recently, we have been observing a jump in prices, and it is explained by the fact that during quarantines there was a demand for some things, now he moved to others, and the proposal could not adapt. That is, the increase in prices that will still continue is explained by an insufficient offer. It is hoped that if the economy functions well, this drawback will be eliminated: price signals will make certain types of business more profitable, for example, chips production. That is, these factors lead to an increase in prices, but not necessarily to sustainable acceleration of inflation. Inflation is largely derived from people's psychology. It is difficult to predict whether they will consider the current jump in prices by a one -time event or it will gradually strengthen their minds, generating inflationary expectations.

Economists were not very successful in predicting the psychological behavior of people. Inflational expectations were low for a long time, and, according to my estimates, many people consider the current increase in prices a single phenomenon. But the risk of the perception of the fact that they will grow year after year increases, so we must closely monitor this situation. If you look at the level of inflation expectations in the financial market, it increased, but not to the extent that it is to start very worried.

The main economist of the British Foreign Ministry: “The Central Bank must create financial incentives to take into account climatic risks”