crisis management to medium term sustainability. this includes reassessing the impact on cyber and other it - related risks, whilst at the same time recognising the need for technologydriven solutions to support certain activities. there are a number of lessons that can be learnt on operational resilience from the lockdown phase : disaster recovery plans involving redundant office spaces simply did not work. this particularly affected the call centres and other functions that were not set up to work from a non - office environment. there were shortages in the supply of technology built to corporate security standards to support working from home on a much larger scale than firms had generally envisaged in existing business continuity plans. https : / / www. bankofengland. co. uk / prudential - regulation / publication / 2018 / solvency - 2 - matching - adjustment - ss https : / / www. bankofengland. co. uk / prudential - regulation / publication / 2019 / liquidity - risk - management - for - insurers https : / / www. bankofengland. co. uk / prudential - regulation / publication / 2019 / solvency - ii - prudent - person - principle all speeches are available online at www. bankofengland. co. uk / news / speeches firms did not uniformly have sufficient visibility of the operational and financial resilience of some of their key outsourcing service providers. finally, cyber criminals ’ activity continued throughout the lockdown, whereas firms ’ it and cyber risk management staff had to adapt to the new way of working. two principal methods used by criminals, phishing emails and malware, continue to rise. many authorities have highlighted an increase in cyber risk7. we encourage firms to consider these risks carefully when starting to think about the transition out of the lockdown phase. the last priority i ’ ll touch on today is climate change. addressing the financial risks from climate change is one of the bank ’ s strategic priorities and last year we published expectations for firms to manage the financial risks from climate change8, which included expectations around governance, risk management, scenario analysis and disclosure. as well as having a named senior manager responsible for climate risks, boards collectively need to understand the impact of climate change on their firm ’ s business strategy. scenario analysis is a key tool that firms can use as part of their assessments of the impact of climate risks on their balance sheet and broader business strategy. it helps report relevant management

output gap from energy prices, which serves to highlight the material uncertainty around these estimates in general. chart 2 : the energy price shock might have had a smaller impact on the output gap than we previously thought estimated impact of energy prices on output gap, for different model relationships ( a ) source : bank of england ( a ) chart shows the estimated impact of energy prices on the output gap in the november 2024 mpr forecast using different model relationships. all three lines use the same energy price profile, taken from the november 2024 mpr forecast. the line labelled ‘ previous ’ refers to the 2021 model relationships. the line labelled ‘ cross check model ’ refers to a re - estimated version of the compass dsge model. see box b in the november 2022 mpr for further discussion of the treatment of energy price shocks. once again, these changes matter for medium - term inflation. indeed the lower effect on demand via the energy price channel helps to explain part of the upwards revision in the output gap that i just talked about. as i mentioned earlier, a 1 percentage point upwards revision in the output gap, which is roughly what we have here, might push up on inflation by 0. 3 to 0. 4 percentage points. example 3 : other drivers of energy prices my final example relates to the role of climate mitigation policy in energy prices where there is now evidence that policies aimed at the climate transition were probably more important contributors to the recent rise and fall in inflation than we previously thought. as chart 3 shows, carbon prices rose materially in 2021 and 2022, peaking at around £100 per tonne of carbon dioxide ( co2 ) equivalent in the summer of 2022, a roughly 100 % increase in price on the previous year. [ 14 ] from 2021 onwards, the uk ’ s emissions trading scheme [ 15 ] saw a reduction in the supply of carbon permits, a decreasing share of permits being given out for free, and an expansion of sectoral coverage ( over the 2021 to 2030 period ). this was around the same time as the increase in wholesale gas prices, which could also have contributed to this rise in carbon prices. these carbon costs are non - trivial in the sectors most exposed to the scheme, like the power sector. in 2022, during the peak of energy price shock, the wholesale price of gas was the dominant driver of high electricity prices. in 2024, however, carbon costs which amounted to roughly 50 % of the fuel costs for gas - fired