Monetary policy and climate change

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climate change

Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference on “Scaling up Green Finance: The Role of Central Banks”, organised by the Network for Greening the Financial System, the Deutsche Bundesbank and the Council on Economic Policies, Berlin, 8 November 2018.

2018 has seen one of the hottest summers in Europe since weather records began. Increasing weather extremes, rising sea levels and Arctic melting are now clearly visible consequences of human-induced warming.

Climate change is not a theory. It is a fact.

While only one dimension of the human cost, the consequences in macroeconomic terms look set to be large. Without further mitigation, cumulative emissions pose significant risks of economic disruption.

While there is a wide recognition that environmental externalities should be primarily corrected by first-best policies, such as taxes, all authorities, including the ECB, need to reflect on, and consider, the appropriate response to climate change.

In recent years, central bankers, led by Bank of England Governor Mark Carney, have started discussing the financial stability implications of climate change. The first tangible results are trickling in. The Financial Stability Board’s Task Force on Climate-related Financial Disclosures published its first status report just a few weeks ago. Only last week, ECB Banking Supervision communicated to banks that climate-related risks have been identified as being among the key risk drivers affecting the euro area banking system.


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