Philip R Lane: Climate change and monetary policy
Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Climate, Nature and Monetary Policy Conference, jointly organised by the ECB, the Centre for Economic Transition Expertise (CETEx) and the Frankfurt School of Finance and Management, Frankfurt am Main, 5 May 2026.
Introduction
Global warming is no longer a distant threat. The Copernicus Climate Change Service has confirmed that 2023, 2024 and 2025 were the hottest years in recorded human history (Chart 1, panel a). The changing climate has also increased the frequency and intensity of extreme weather events: more severe heatwaves, longer-lasting droughts, heavier rainfall and flooding, and more destructive wildfires, to name just some cases (Chart 1, panel b). The evidence indicates that global warming has accelerated, with recent studies indicating that the planet is heating faster than at any point since the start of the available observational time series in the 1880s. While climate change transition policies have been implemented and are planned in many countries, the world is on a trajectory towards a warming of around 2.8 degrees by 2100 under current policies and 2.3-2.5 degrees if all Paris Agreement policy commitments are delivered.
Global warming and the increase in extreme weather events cause substantial economic damage.
Recent analysis suggests that global GDP per capita would be more than 20% higher today had no warming occurred between 1960 and 2019: this corresponds to a 0.3% reduction in the annual growth rate over this period.[5] While climate change might account for only a limited proportion of the annual variation in growth rates, its persistence means that its cumulative impact is substantial.