Incoming Reserve Bank Governor Michele Bullock has warned increased volatility and higher energy costs caused by climate change could make it harder to control inflation.
In a speech on Tuesday night, Ms Bullock warned the transition away from fossil fuels could add inflationary pressure to the economy in the short to medium-term, with power prices set to rise unless the closure of coal plants is offset by new energy sources.
The exact effects of climate on the economy would"depend on the specific policy measures put in place, changes in consumer preferences, the availability of technologies, and the timing and speed of the process," she said, but the need for an orderly transition was clear. The Albanese government has been vocal about its goal to reduce emissions by 43 per cent of 2005 levels by 2030, as well as increase the amount of renewable energy in the grid to 82 per cent of the total supply.
Ms Bullock highlighted those concerns as she pointed to the massive gap in investment hampering efforts to speed up the move toward net zero."This could put upward pressure on energy prices if coal plant closures are not matched by renewables supply and storage. The incoming RBA Governor added this would include more indirect effects, as businesses passed on higher energy costs to consumers and the price of services rose.
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