Reflections of climate change on central banking and monetary policy

Climate change has accelerated due to the increase in greenhouse gas emissions from human activities, leading to a growing concentration of these gases in the atmosphere. Climate change, which involves long-term alterations in average temperatures and weather patterns, has resulted in more frequent extreme weather events and the degradation of ecosystems. Research indicates that climate change has the potential to impact the economic system in various ways, posing a threat to both price stability and financial stability. Due to its potential effects on the financial system, climate change has increasingly become a focus for central banks. With growing awareness in recent years, it has become clear that the effects of climate change on the economy and the financial system need to be better understood, prompting central banks and regulatory bodies to consider climate-related risks. As long as climate change affects price and financial stability dynamics, it is likely that central banks will be expected to take responsibility in addressing it. The primary objective of this study is to explore the implications of climate change on central banking and monetary policy. In line with this objective, relevant national and international literature has been reviewed, and the content of the study has been developed based on the information gathered. The study examines the potential impacts of climate change on the economy in general, and specifically on central banking and monetary policies. It also explores the perspectives of central bank practitioners on the role of central banks in addressing climate change and provides information on the policy tools available to central banks for mitigating climate risks. Additionally, examples of green monetary policy practices are discussed, and an overview of the regulations implemented by the Central Bank of the Republic of Turkey (TCMB) in response to climate change is provided.ktır.