There are two broad approaches to dealing with this profound shock – adaptation and mitigation. Adaptation involves changing behaviour to reduce the economic and social impacts of climate change (e.g building flood defences, or planting more weather resistant crops). Mitigation involves actively reducing greenhouse gas emissions.
Such an outcome could affect the prospects for price stability and, consequently, it could require a change in the stance of monetary policy. Of course, the ECB’s decision on interest rates at a given point in time will depend on a comprehensive assessment of the anticipated effects of all factors determining the price level over the medium term.