Given the scale of the economic and financial risks posed by climate change, central banks simply cannot ignore the issue. Their own price-stability mandates demand that they start playing an active role in pushing the private sector and the broader economy toward decarbonization and greater climate resilience.
BOSTON – Just as there is no question that climate change brings enormous economic and financial risks, there should be no question that central banks can and must play a role in addressing this mother of all market failures. As central banks in the United States and Europe tighten credit to regain control of inflation, they should also use their supervisory and monetary-policy tools to catalyze and incentivize the transition to a carbon-neutral economy. Inaction is not an option, even if most central banks have not officially incorporated climate-risk management into their mandates.
BOSTON – Just as there is no question that climate change brings enormous economic and financial risks, there should be no question that central banks can and must play a role in addressing this mother of all market failures. As central banks in the United States and Europe tighten credit to regain control of inflation, they should also use their supervisory and monetary-policy tools to catalyze and incentivize the transition to a carbon-neutral economy. Inaction is not an option, even if most central banks have not officially incorporated climate-risk management into their mandates.