Conference Agenda

Climate economics has progressed substantially over the last decades. Developments in methods and available data have led considerable improvements in economic estimates of the physical impacts of climate change. These estimates have been widely used to inform the social cost of carbon, in particular to support the demand within US climate policy for figures which reflect the latest science. However, the implications of physical climate change impacts for the work and mandates of central banks are at an earlier stage of assessment.

Central banks have started work on incorporating climate change considerations into their mission of keeping prices stable and banks safe. In the context of central banks’ price stability mandate, key questions relate to how climate economics can help quantify the macroeconomic impacts of physical climate change, including its impacts on inflation.

A limited number of research contributions has started to answer these questions in a quantitative way. Simultaneously, within central banks, workstreams have started to bridge the gap between climate economic research and macroeconomic climate analysis. This session aims to present results from both endeavours, with the following outline:

--Introduce the themes central banks are grappling with regarding physical climate change impacts and their primary mandate [Thomas Stoerk, National Bank of Belgium & LSE]

--Showcase two recent research contributions on the effects of climate change on inflation:

1. Kotz, Kuik, Lis, Nickel, 2024: Global warming and heat extremes to enhance inflationary pressures (accepted for publication in Nature Communications Earth & Environment; also see ECB working paper) [Max Kotz, Potsdam Institute for Climate Impact Research]

2. Gautier, Grosse Steffen, Marx, Vertier, 2023: Decomposing the Inflation Response to Weather-Related Disasters (Banque de France Working Paper) [Christoph Grosse Steffen, Banque de France]

--Introduce how central banks process estimates from research literature, by presenting the recent report of the NGFS workstream on Monetary Policy [Miles Parker, European Central Bank]

--Highlight how central banks can take the estimates from research literature to use in policy-making [Friderike Kuik, European Central Bank]

The session will thus provide examples and discussion for environmental economists regarding:

--What kind of evidence would help central banks quantify which physical climate impacts are

relevant to their primary mandate?

--How can the climate economics community adapt and sharpen their existing toolkit to ensure that knowledge which already exists within climate economics is adequately translated to useful output for central banks and financial regulators?

Speakers:

Thomas Stoerk, National Bank of Belgium & London School of Economics

Max Kotz, Potsdam Institute for Climate Impact Research

Christoph Grosse Steffen, Banque de France

Miles Parker, European Central Bank

Friderike Kuik, European Central Bank