-4on output and labor productivity. 9 A shifting energy landscape, rising insurance premiums, and increasing spending on climate change adaptations—such as air conditioning and elevating homes out of floodplains—will have implications for economic activity and inflation. As policies are implemented to mitigate climate change, they will affect prices, productivity, employment, and output in ways that could have implications for monetary policy.
Just on its own, the large amount of uncertainty regarding climate-related events and policies could hold back investment and economic activity. 10 Climate Change and Financial Stability Second, the Federal Reserve will need to assess the financial system for vulnerabilities to important climate risks.