New Zealand central bank needs to better understand climate change impact - governor - Nasdaq
New Zealand central bank needs to better understand climate change impact - governor | Nasdaq
By Lucy Craymer
WELLINGTON, Nov 3 (Reuters) - New Zealand’s central bank needs to improve its understanding of how climate change, the macroeconomy and monetary policy interact, Governor Adrian Orr said on Friday.
The impact of drought on the economy was well established and known to historically worsen recessions, he said in a speech.
“Understanding the work to be done to transition to net zero will give us a sense of the potential impact on employment and inflation in New Zealand,” he said.
“Observing policy developments domestically and in other countries will help to develop our sense of how risks may affect the domestic economy.”
The Reserve Bank of New Zealand is working on a number of responses to climate change including stress-testing for climate-related risks and providing guidance for regulated entities on how to manage risk.
“Tackling climate change is both an enormous challenge and an opportunity that we all have an obligation to respond to," Orr said. "It remains within our power to take the steps required to transition our economic and financial systems.”
(Reporting by Lucy Craymer; Editing by Nick Macfie)
(( Lucy.Craymer@thomsonreuters.com;))
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Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”