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Plans made to assess climate impact on the economy with new tools-Bank of Canada

 

The Bank of Canada said on Wednesday that it will bring out new models and data sources to get in-depth knowledge on how climate change is impacting Canada’s economy and said it would incorporate these findings in its quarterly forecasts to help markets price risks.

The central bank said it will assess how often severe weather events and the transition to low-carbon growth affects Canada’s potential output, the labor market, and inflation in a release tied to the UN’s COP26 global climate summit.

“Climate change and the transition to a low-carbon net-zero economy will have significant macroeconomic consequences, touching every region and sector of the Canadian and global economies,” the bank said in a statement.

“It will also have implications for structural change, the growth of potential output, and price stability,” it said.

Increases in the frequency and severity of extreme weather events, along with the low-carbon transition, pose major risks to Canada’s financial system and the central bank’s goal is to help reduce the chance of those risks, the bank added.

It committed to four steps, including developing new models and data sources, assessing the Canadian financial system’s exposures to climate risk, and calculating, mitigate and reporting on its operational risks related to climate change.

The Bank of Canada also pledged to work with domestic and international partners on issues like climate disclosures and the climate transition for countries with large resource sectors, like Canada.

Canada is the world’s fourth-largest oil producer, with much of its output coming from carbon-intensive oil sands.

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