Latvia is not prepared for the way the economy will be changed by climate neutrality requirements. Mostly businesses in Latvia think only about cost reduction, not new ways of earning in the context of climate requirements, said the governor of the Bank of Latvia Martins Kazaks.
“I don’t think the private sector or state administration are aware of just how massive these changes will be,” said the governor of the central bank.
He stressed that both on the national and corporate level climate change was taken into account and business models were formed with climate change in mind.
Even the laws are being adapted – both in the EU and the world.
“A look at the price of CO2 emission quotas shows they have increased considerably and are currently at $50-60/ton. Manufacturers that use natural resources and pollute the environment have to pay for this. In order to achieve climate neutrality by 2050, observations show that the price per ton will likely reach $650. Yes, 2050 may seem far away, but it is not like this price will start increasing at the end only. Prices increase gradually. In 2030, the price of CO2 emission quotas may reach $250-300/ton. Are our businesses ready for that? Will businesses be able to manufacture anything at such prices? Are our residents prepared to pay for expensive electricity, gas and heating? These will be enormous changes to the world economy,” warned Kazaks.
He also said until now people in Latvia had looked at this topic from one side and generally in the direction of reducing climate neutrality-related costs.
“Climate change is not just about costs. Business model change can generate profits. The question is which side we are as a country. Either we are the people who are only trying to reduce costs, or we are the people who sell technologies and skills and profit from that,” says the governor of the central bank.
“Additionally, we have to consider that Latvia is neither a poor nor a particularly wealthy country. Wealthy countries can afford delays and then purchase the technologies they need and adopt them, because if you do this at the last moment, it usually costs a lot. We are not so rich to afford technologies at the last moment. This is why Latvia should prepare for changes in due time. The volume of changes is enormous. Are we prepared as an economy? Not right now! We can reduce costs to make changes less painful and preserve our competitiveness. But there is another element – we can generate additional income by developing new technologies and selling them. This is where I have a question – why are we buying all the time? Why aren’t we selling? To be able to create and sell, we need investments,” says Kazaks.
He said it was very good that Latvia used money from the EU Recovery and Sustainability Mechanism and invested it in digitization and “green things”.
“But let’s look at Scandinavia. Scandinavians, who are already leaders in this area, invest 50-70% instead of the required 37%. Unfortunately, people in Latvia want to cover all basic needs and then think about the future. I believe development issues should be prioritized more,” stresses the governor of the central bank.
He also admits climate neutrality is not an issue a single person can deal with on his own.
This means everyone needs to cooperate – the state administration, businessmen and researchers.
“Around the world the emphasis is put on sustainable economy and climate affairs play a major role. If we ignore them, this means falling behind,” warns Kazaks. (BNN/Business World Magazine)
