Transcription of Climate change: Macroeconomic impact and implications …
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Climate change: Macroeconomic impact and implications …
1 Climate change : Macroeconomic impact and implications for monetary policy (Book chapter in: Ecological, Societal, and Technological Risks and the Financial Sector; forthcoming: July 2020) Sandra Batten, Rhiannon Sowerbutts and Misa Tanaka Bank of England1 Abstract Climate change and policies to mitigate it could affect a central bank s ability to meet its monetary stability objectives. Climate change can affect the macroeconomy both through gradual warming and the associated Climate changes ( total seasonal rainfall and sea level increased) and through increased frequency, severity and correlation of extreme weather events (physical risks). Inflationary pressures might arise from a decline in the national and international supply of commodities or from productivity shocks caused by weather-related events such as droughts, floods, storms and sea level rises. These events can potentially result in large financial losses, lower wealth and lower GDP.
therefore their implications for monetary policy. Transition risks, on the other hand, are defined as those risks that might arise from the transition to a low-carbon economy, which will be required to limit the cumulative emission of greenhouse gases, particularly carbon dioxide, to achieve the Paris Agreement of limiting
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