Climate change and the role of central banks Hiona Balfoussia Department of Economic Analysis & Research Bank of Greece

Top 5 global risks in terms of impact Source: http://reports.weforum.org/global-risks-2017/the-matrix-of-top-5-risks-from-2007-to-2017/

Climate Change Impacts Study Committee (CCISC) Set up in 2009 by the Bank of Greece, to study the economic, social and environmental impact of climate change in Greece. Has published two main reports: “The environmental, economic and social impacts of climate change in Greece”, 2011 “Greek tourism and climate change: adaptation policies and a new growth strategy”, 2014 In 2015 drafted the Climate Change National Adaptation Strategy for the Greek Ministry of Environment and Energy Currently studying the implications of climate change for the conduct of monetary policy and the role of Central Banks

The cost of climate change Scenario cost comparison (in billion Euros) 2011 – 2100 cost saving compared to inaction 0% discount rate 2% discount rate inaction €701 €202 adaptation total cost €578 €123 €177 €24 adaptation measures €67 €28 other impacts €510 €149 mitigation €436 €265 €156 €46 mitigation measures €142 €73 €294 €83 * Total cumulative costs at 2008 constant prices, expressed as a loss of GDP relative to base year 2008, Source: CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece, p.377

The cost of climate change Areas of vulnerability: agriculture tourism coastal systems water reserves Potentially major consequences on household income and the economy as a whole.

Climate Change National Adaptation Strategy Drafted under a Memorandum of Cooperation between the Bank of Greece, the Greek Ministry of Environment and Energy and the Academy of Athens. Sets out the general objectives, guiding principles and implementation tools of an effective and growth- oriented adaptation strategy. The first step of a continuous and flexible process for planning and implementing the necessary adjustment measures at national, regional and local levels.

Climate change and the conduct of monetary policy CCISC currently undertaking a study on the implications of climate change for the conduct of monetary policy and the role of Central Banks As a result of climate change: macroeconomic developments could become less stable economic growth could fluctuate considerably Monetary policymaking rendered more challenging. Environmental risks expected to affect Central Banks’ objectives and actions.

Climate change and the conduct of monetary policy Climate change constitutes a systemic risk factor for the economy and the financial sector Potential impact on degree of economic uncertainty Direct consequences for price stability through: food prices energy prices

Climate change and the conduct of monetary policy Two main types of risk are identified: Transition risk: environmental regulation affects carbon-intensive businesses established technologies become redundant Physical risk of extreme weather events: direct effects (e.g. damage to property) indirect effects (e.g. resource scarcity)

Climate change and the conduct of monetary policy Sensible to try to incorporate environmental risks in central banks’ financial stability and macroprudential policy frameworks: Variations of existing policy tools could potentially influence investment decisions towards green investments Financial institutions could be encouraged to consider climate and environmental risks in their operations

The CCISC on the web Thank you! CCISC webpage http://www.bankofgreece.gr/pages/en/klima (shortcut banner on the homepage www.bankofgreece.gr) for more information please contact us at: climatechange@bankofgreece.gr