timothy lane : thermometer rising - climate change and canada's economic future remarks by mr timothy lane, deputy governor of the bank of canada, at the finance and sustainability initiative, montreal, quebec, 2 march 2017. * * * i would like to thank erik ens for his help in preparing this speech. introduction it is my privilege to speak to you about the economic implications of climate change — one of the biggest challenges facing canada and the world in the 21st century. let me first congratulate the finance and sustainability initiative for your leadership in promoting responsible investment for sustainable development. your work is vital to putting finance at the service of environmental sustainability — helping the private sector to identify the risks and opportunities inherent in climate change and green finance. the connection between climate change and the bank of canada ’ s responsibilities for the stability of prices and the financial system is not an obvious one. we are not experts on climate science, nor do we control the tools to limit global warming. however, climate change itself and actions to address it will have material and pervasive effects on canada ’ s economy and financial system. while many of these will play out over many decades, i will argue that they are already starting to become important. so, the bank needs to consider these effects as we deliver on our mandate to promote the economic and financial well - being of canadians. in the time i have with you, i would like to share the bank of canada ’ s perspective on the economic effects both of global warming and of the tools and policies that can be deployed to address it. i will discuss some of the challenges — as well as the opportunities, because there are many — that lie ahead for canada. i will also talk about how the work of the bank connects with these issues. the future becomes the present here in montreal in early march, it might be tempting to think that rising temperatures could be a welcome change for canada. but, as we know, that would be wrong. global warming is already having negative effects, with significant economic costs compounding a heavy human toll around the world, including in canada. climate scientists are convinced that global warming is, at least to a large extent, attributable to human activity. climate systems, like economic systems, are complicated : the forces at work can interact in unforeseen ways, so there are some significant unknowns. but these unknowns are all the more reason to act, especially if they imply even a small risk of a

judgments on those issues. the bank ’ s approach to policy is evolving in light of these developments. we have made some major advances in our thinking in the past year, and in the transparency with which we present these issues to you. many of the key variables that are essential to the policy decision – measures of capacity, the neutral rate of interest, our outlook for growth and inflation, and so on – are now conveyed in ranges. these elements of uncertainty are being explicitly incorporated into our decision making. all of this demands that we think of monetary policy as an exercise in risk management. although we regard the risks around attaining our inflation target over a reasonable time frame to be balanced, as policy - makers, we acknowledge that, in the current situation, the consequences of an upside risk would be more manageable than those associated with a downside risk. if this makes central bankers seem overly preoccupied with downside risks, and seem gloomy to you, then take heart – we are just doing our job. bis central bankers ’ speeches