WEF 2020: Mnuchin and Lagarde conflicted over the energy transition plan

Christine Lagarde, the president of the European Central Bank, and U.S. Treasury Secretary Steven Mnuchin laid bare their stark differences over how the global community should transition to cleaner energy sources.

The corporate world’s role in protecting the environment was a central theme of 2020’s World Economic Forum in Davos, Switzerland.

Speaking on a panel Friday as the annual meeting drew to a close, Lagarde said that central banks needed to guide the economic modelling of how changes to the environment should be costed and mitigated.
The president of the ECB (European Central Bank) further said that banks, companies, accountants, and rating agencies would need to move ahead of quarterly and medium-term forecasts and begin to think 30 years out.

Mnuchin responded to Lagarde’s suggestion, saying he didn’t think forecasting the cost of protecting the environment was possible.
“Christine, you can have many people and model it, but I just don’t want to kid ourselves. I perceive there’s no way to likely model these risks over the next 30 years with a level of certainty, given what I think is the technological changes along the way,” Mnuchin said to Lagarde.

The recently appointed president of the ECB, Christine Lagarde, responded instantly, saying that long-term modelling would help press firms understand the cost and process of shifting to new, less carbon-rich energy resources.

She suggested, “If we push firms into the direction of actually forecasting the transition, pricing it, and making sure that they move to cleaner and cleaner energy uses, then it helps.”

Mnuchin replied directly, interpreting Lagarde’s suggestion as a direct cost to a business.
“I don’t think we understand how to evaluate these things,” Mnuchin said, adding, “Current pricing of future greener energy resources was being inflated.”
“Therefore, I think we’re somewhat overestimating the cost. So, if you want to tax people, put a carbon tax. That is a tax on many hard-working people. I believe that costs will be significantly lower ten years from now – because of technology – than we think they are today, Mnuchin added.

Earlier, Steven T. Mnuchin condemned the U.S. for becoming much more efficient through carbon technology and energy use but termed India and China countries that needed to bring “significant improvement in terms of environmental issues.”

Christian Lagarde and Steven Mnuchin clash over the energy transition plan during a panel session on the closing day of the World Economic Forum 2020.