ii and iii to the fifth assessment report of the intergovernmental panel on climate change ( 2014 ). see www. metoffice. gov. uk / news / releases / archive / 2015 / record - uk - temps - 2014. see ipcc ( 2014 ). see ipcc ( 2014 ) which notes that the effects of anthropogenic greenhouse gas emissions, together with other anthropogenic drivers are “ extremely likely to have been the dominant cause of observed [ global ] warming since the mid - 20th century ”. see, for example, otto et al ( 2015 ). see munich re, natcatservice ( 2015 ). the report “ risky business – the economic risks of climate change in the united states ” ( 2014 ) suggests that in the usa $ 238 - 507bn worth of coastal property could be below sea level by 2100. research by lloyd ’ s identifies climate change as an important supply - side issue for food security. see www. lloyds. com / ~ / media / lloyds / reports / emerging % 20risk % 20reports / food % 20report. pdf. this is consistent with the views expressed by lloyd ’ s market participants surveyed by the pra for its report to defra. bis central bankers ’ speeches climate change is the tragedy of the horizon. we don ’ t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix. that means beyond : • the business cycle ; 9 • the political cycle ; and • the horizon of technocratic authorities, like central banks, who are bound by their mandates. the horizon for monetary policy extends out to 2 - 3 years. for financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. 10 in other words, once climate change becomes a defining issue for financial stability, it may already be too late. this paradox is deeper, as lord stern and others have amply demonstrated. as risks are a function of cumulative emissions, earlier action will mean less costly adjustment. 11 the desirability of restricting climate change to 2 degrees above pre - industrial levels 12 leads to the notion of a carbon “ budget ”, an assessment of the amount of emissions the world can “ afford ”. such a budget - like the one produced by the ip

banks have been on the alert for any signs that higher oil prices would feed into higher wages, and so trigger an inflationary spiral. and so far wage growth has remained moderate in all developed countries, including the uk. monetary policy inflation has remained firmly under control despite a doubling in the price of oil. this, to my mind, is striking evidence of a sea change in policy since the 1970s. but how far was the great stability due to good policy, as opposed to globalisation or plain good luck? this broader question is probably unanswerable, but a couple of points are worth making. first, there is no doubt that, in the medium term, the actual inflation rate is determined by the bank of england. our decisions about interest rates – the price of money – determine the amount of total money spending in the economy. the rate of inflation reflects the difference between this spending and what the economy is capable of producing – total supply. the faster money spending grows relative to supply, the higher inflation will be. in that sense low inflation reflects policy, not luck. but external conditions may make it more or less easy to keep inflation low and stable. if the bank aims for a low but positive rate of inflation, and imported goods prices are falling, the prices of other goods and services will have to rise faster to compensate. so for example, the prices of imported goods and services fell by 13 % between 1995 and 2004, while the prices of other consumer goods and services rose, on average, by around 20 %. to produce this result, and keep overall inflation close to target ( as it was ), the bank was probably able to keep interest rates lower than they might otherwise have been. that ’ s why people sometimes say that the falling world prices resulting from globalisation have acted as ‘ favourable tailwinds ’ for central banks over the past decade. and why, over the last couple of years, there have been worries that high and volatile energy prices would provide ‘ strong headwinds ’. second, there have been important innovations in the practice of monetary policy over the past decade. these have not been confined to the uk - there is an international traffic in good monetary policy ideas, as in almost everything else. so while the uk was a pioneer in some respects, our current approach to policy is more fairly described as close to international best practice. there ’ s been a widespread move to give central banks more independence, with clear objectives and a strong commitment to transparency and accountability