Christine Lagarde, President of the European Central Bank (ECB)
The head of the European Central Bank and US Treasury Secretary Steven Mnuchin argued over Ms Lagarde’s view central banks need to lead the way in forecasting the cost of protecting the environment.
However, Mr Mnuchin said to do so would result in a “tax on hard-working people”.
The pair clashed at a panel on Friday and the World Economic Forum in Davos, Switzerland.
Ms Lagarde told the audience it was up to banks to lead the economic modelling of how changes to the environment should be costed and mitigated.
She said banks, accountants, companies and rating agencies need to move away from quarterly and medium-term forecasts and start thinking in terms of 30 years out.
She talked about the need to price the cost of transitioning to a low carbon economy.
However, Mr Mnuchin said he did not think forecasting the cost of protecting the environment was possible.
He said: “Christine, I think you can have a lot of people and model it, but I just don’t want to kid ourselves.
U.S. Treasury Secretary Steven Mnuchin
“I think there is no way we can possibly model what these risks are over the next 30 years with a level of certainty, given what I think is the changes in technology along the way.”
Ms Lagarde said companies needed a “push” in the direction of actually anticipating the transition, pricing it and making sure they move to cleaner and cleaner energy uses.
Mr Mnuchin argued there was no way to know how to price these things, adding the current pricing of future greener energy sources was being inflated.
He said: “So, I think we are overestimating the cost. So, if you want to put a tax on people, go ahead and put a carbon tax.
“That is a tax on hard-working people.
“I personally think the costs are going to be much lower 10 years from now — because of technology — than we think they are today.”
Speaking earlier, Ms Lagarde said Europe faces a Brexit “cliff edge” at the end of this year.
Ms Lagarde said Europe faces a Brexit ‘cliff edge’ at the end of this year
She said: “We don’t know exactly what the trade relationship will be. And [the UK] is a big partner for the euro area, so that’s certainly a question mark.”
This comes after the International Monetary Fund, of which Ms Lagarde is a former managing director, made an embarrassing U-turn and admitted post Brexit Britain will experience a period of stable growth.
The announcement was a reversal of the “project fear” style catastrophe prediction made by Ms Lagarde on the eve of the 2016 referendum.
Speaking four years ago, Ms Lagarde said the impact of Brexit would have “pretty bad, to very, very bad” consequences for the UK.
She said she had ”not seen anything that’s positive” about Brexit, warning it could lead to a “technical recession”.
An IMF report on the UK economy at the time suggested a leave vote could have a “negative and substantial effect”.
However, in the latest IMF assessment, the UK is predicted to experience a 1.4 percent growth this year, and 1.5 percent in 2021.
In each case this is better than in the Euro Area, where figures are expected to be 1.3 percent and 1.4 percent respectively.