On 5 May 2026, Philip R. Lane, a member of the ECB’s Executive Board, outlined how climate change and the green transition affect the euro area economy and monetary policy. He noted that the hottest years on record and more frequent extreme weather events have already raised food inflation and reduced potential output. The ECB has incorporated climate risks into its macro‑modeling, estimating that carbon‑tax pathways could raise headline inflation by up to 0‑0.4 percentage points and lower real GDP by a few tenths of a percent. Lane described how climate factors alter bank‑lending standards, widen credit spreads for high‑emitting firms and influence the transmission of policy rates. He concluded that the ECB will continue to monitor climate dynamics as part of its inflation‑targeting mandate.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
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