BoE's Mann: Climate change inflation is a 'concern' for all central bankers

investmentweek.co.uk:

Catherine Mann (pictured) said it was important to recognise 'there is no no climate change scenario to fall back on' when it comes to monetary policy.

Mann, who is a member of the Bank's Monetary Policy Committee, told delegates at the Environmental Economics Seminar at the University of Oxford yesterday (13 November) that climate change was becoming a «concern for monetary policymakers, directly within a price stability mandate».

«That applies whether the monetary policymaker's remit includes a reference to climate change or not,» she said, pointing out supporting government climate change policies is now within the secondary objectives of the Bank of England's remit.

Climate change and mitigation policies have the potential to change how once-familiar shocks, for instance demand shocks or monetary policy itself, transmit through the economy, Mann said. 

Bank of England rate setter Catherine Mann breaks ranks with gloomy inflation prediction

At the same time, the global nature of the climate challenge along with specific policy approaches and net zero plans, «may cause unanticipated international spillovers».

As a «small open economy», the UK's macroeconomic environment will be affected by the «spillovers» of climate mitigation policies set abroad, particularly by its largest trading partners, Mann warned.

The MPC member said it was important to recognise «there is no 'no climate change scenario' to fall back on» within monetary policy.

«It is not a 'if we do nothing, it is business as usual',» she cautioned.

From an economic perspective, Mann noted that markets have failed to prevent climate change because there was no market for emissions, which in the past «have been practically costless, and have thus been