Central banks cannot remain spectators to climate change: RBI Deputy Guv Michael Patra
Reserve Bank of India (RBI) deputy governor Michael Patra said.
“Climate change can affect price stability through supply shocks such as food and energy shortages and through a decline in productive capacity. Demand shocks can arise due to the loss of wealth of firms and households on account of frequent natural disasters.
Physical and transition risks can affect the balance sheets of financial institutions and banks, limiting the flow of credit to the real economy,” Patra said in a speech at the New York Fed Central Banking Seminar organised by the Federal Reserve Bank, New York.
Patra acknowledged that though central banks generally pursue a relatively narrow mandate focused on stability without climate change being a part of it. But as evidence accumulates that climate change is overwhelmingly due to human activity, central banks cannot just remain silent spectators.
“There is a growing recognition that even if governments are the most influential agency for climate change, central banks and financial sector regulators/supervisors are going to become the major stakeholders because (1) financial institutions play a key role in intermediation and hence have a more direct role in addressing climate change; and (2) climate change is impacting the achievement of their mandates of price and financial stability,” he said.
Patra said that energy production drives around three-quarters of global green house gas emissions.
