The Consequences of Climate Change for Monetary Policy

Stéphane DEES * Conseiller, Direction de la conjoncture et des prévisions macroéconomiques, Banque de France ; maître de conférences associé, Université de Bordeaux. Contact : stephane.dees@banque-france.fr.

Pierre-François WEBER *** Directeur des Politiques européennes et multilatérales, Banque de France. Contact : Pierre-Francois.Weber@banque-france.fr.Les opinions exprimées dans cet article ne représentent pas nécessairement l'avis de la Banque de France ou de l'Eurosystème.

Climate change is one of the major challenges central banks are facing, potentially affecting the macroeconomic variables used to underpin their monetary decisions and the channels through which these decisions are transmitted to the real economy. Climate change could affect the policy space central banks have to fulfil their mandate and, owing to increased uncertainty, it could also lead them to consider some of the trade-offs to be faced in a monetary inflation targeting regime. As a result, central banks should not only integrate the effects of climate change into their analyses and models, but also take climate-related risks into account in the development of the instruments used to implement monetary policy.