Bank of England urged to do more to tackle climate crisis

"argued in a speech at Lloyd's of London in September 2015 that the short time-horizons of politicians and policymakers made it difficult to tackle the climate emergency, despite the threat it posed to the global financial system. Carney said: The combination of the weight of scientific evidence and the dynamics of the financial system suggest that, in the fullness of time, climate change will threaten financial resilience and longer-term prosperity. While there is still time to act, the window of opportunity is finite and shrinking."

"They urge Threadneedle Street to commission a review of monetary policy, given the increasing frequency of climate-related shocks that can push up food prices, for example. Some economists have argued that central banks should be prepared to tolerate temporarily higher inflation, and even that governments should consider building up buffer stocks of staple foods to cushion the impact of price spikes caused by droughts or floods, which are becoming more common."

"The briefing warns that by raising interest rates to respond to such price rises, the Bank increases the cost of the huge public investment needed to transition away from fossil fuels. The UK just experienced its worst inflationary crisis in four decades, triggered by fossil fuel price spikes and supply chain bottlenecks, which the UK's monetary policy approach proved ill-equipped to address,"

A coalition of ten campaign groups urges the Bank of England to strengthen action on climate risks to the financial system a decade after Mark Carney's warning. The groups ask Threadneedle Street to commission a review of monetary policy because climate-related shocks increasingly push up food prices and inflation. Some economists suggest central banks may need to tolerate temporarily higher inflation and that governments could build buffer stocks of staple foods to cushion price spikes from droughts or floods. The briefing warns that raising interest rates to counter such inflation raises the cost of public investment needed for the energy transition. The UK recently experienced a severe inflation crisis driven by fossil fuel price spikes and supply-chain bottlenecks.

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