2019 ), ‘ growth impacts of swiss steering - based climate policies ’, swiss journal of economics and statistics 155 ( 9 ), pp. 1 – 13. page 4 / 12 let ’ s now move on to the second category of climate change risks, transition risks. these include the economic costs and benefits resulting from adjustments to regulations and government policies aimed at decarbonising the economy. examples are the scrapping of polluting production processes, the growth of investment into researching and developing green technologies, and an unanticipated adoption of new taxes or subsidies. as with any other tax, the introduction of a carbon tax could change the sectoral composition of domestic production in a way that is significant but hard to quantify. that being said, transition risks are above all likely to impact the financial system – through the revaluation of assets. a sudden shift in climate and energy policy could reduce the value of assets in the sectors most affected by the new regulations ( e. g. commodities, automotive, heavy industry ). for banks, this would erode the creditworthiness of debtors. in the area of mortgage lending, the adoption of stricter environmental standards could also diminish the collateral value of non - compliant real estate. 7 as you can see, climate risks may be of interest to central banks on a number of fronts. each central bank tackles these challenges in its own way, depending on the profile of the economy in question and the institutional framework within which it operates. countries are affected differently by climate risks due to their geographic location and economic structure. i am thinking in particular of countries that are partially below sea level ( e. g. the netherlands ), those that are highly exposed to extreme weather events ( e. g. droughts, storms, floods ) and economies in which carbon - intensive industries ( e. g. steel and cement ) are strongly represented. similarly, the institutional framework of each central bank will determine its room for manoeuvre in discussions on climate change. some, for example, are responsible for microprudential supervision and also function as bank resolution authorities. they have to evaluate the soundness of each bank ’ s balance sheet, and this includes assessing banks ’ exposure to climate risks. in switzerland, this role is assigned to the financial market supervisory authority ( finma ). other central banks advise the government and are expected to take a position on issues that go beyond pure monetary policy ( e. g. fiscal or energy policy

on the economic and financial risks that emanate from global warming and associated climatic events on the one hand, and from measures implemented to support the transition to a low - carbon economy on the other. i shall also explain how, within the scope of its monetary policy mandate, the snb factors these risks into its deliberations and actions. economists began to view climate change as a major challenge in the 1970s and this topic has since been the subject of numerous studies. 1 furthermore, in 2018, the sveriges riksbank prize in economic sciences in memory of alfred nobel, the equivalent of the nobel prize in economics, recognised william nordhaus for his work on integrating climate change into long - run macroeconomic analysis. nordhaus, w. d. ( 1977 ), ‘ economic growth and climate : the carbon dioxide problem ’, american economic review 67 ( 1 ), pp. 341 – 346. page 2 / 12 it may seem obvious, but it is worth reminding ourselves that our planet has undergone numerous climatic changes throughout history. however, in the past, these changes have essentially been the result of natural forces. today, global warming is largely attributable to human activity – and the rate of warming is faster than it has been in the past. 2 climate change is a negative side - effect of economic activity – what economists call a ‘ negative externality ’. the externality arises because the costs caused by the emission of co2 and other greenhouse gases are not borne by the emitters. when economic agents emit co2, they do not internalise the effect of these emissions on the planet or on future generations. this is a classic ‘ tragedy of the commons ’ scenario : 3 the atmosphere – a shared or ‘ common ’ resource that is available to us all but belongs to no one – is being overexploited and degraded. the mechanism underlying the ‘ tragedy of the commons ’ is well understood and documented by economic theorists. yet, in the case of global warming, several factors are in play that make the phenomenon difficult to grasp and remedy. first, both climate change and its effects on the economy are hard to estimate with any degree of accuracy. 4 second, the impact of climatic phenomena is transnational and this complicates efforts to respond appropriately. third, the effects of climate change are felt incrementally and over a very long timescale, which includes future generations. the needs, precise aspirations and technical capabilities of these future generations