The European Central Bank (ECB) and the International Monetary Fund (IMF) have issued warnings about the potential impact of climate change, unpredictable weather, and the transition to green energy on the euro zone's economic health and the ECB's ability to set monetary policy. According to research conducted by the ECB, these factors could lower potential output, accelerate inflation, and decelerate growth.
Miles Parker, a senior economist at the ECB, highlighted that the long-term effects of unmitigated climate change could be more detrimental than the initial output reduction caused by transitioning to a net-zero carbon economy.
In addition to these concerns, an ECB survey has shown that companies within the euro area are worried about transition risks due to stricter environmental standards.
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