ECB's Elderson highlights climate impact on eurozone economy

Frank Elderson, a member of the European Central Bank’s (ECB) Executive Board, stressed the need to factor in climate change consequences when shaping economic policy. He warned that ignoring environmental risks could trigger serious economic challenges.

The official cited the summer of 2022 as an example, when extreme heat drove food prices up by 0.4% to 0.9%. Germany's economy, the region's largest, was particularly hard-hit by the adverse weather. This situation ultimately forced the ECB to reconsider its monetary policy approach.

The European regulator plans to account for not just climate change impacts but also natural resource depletion. This decision marks a new approach to ensuring price stability and supervising the region's largest banks.

When developing new regulatory tools, the ECB will analyze the state of fish stocks, forest resources, soil quality, and water supply issues. Based on the findings, the central bank plans to adjust collateral requirements and asset purchase strategies. This will enable more effective management of economic risks.