By Julie Gordon

OTTAWA, Reuters – On Wednesday, the Bank of Canada stated that new models and data sources will be developed to understand climate change’s impact on Canada’s economy. It also said these results would be included in its quarterly forecasts for helping markets price risk.

In a statement, the central bank said that it would assess the impact of more severe weather and the shift to low-carbon economic growth on Canada’s output potential, labor market, and inflation.

The bank released a statement saying that climate change and the transition towards a low-carbon, net zero economy would have major macroeconomic implications. This will affect every sector and region of Canada and around the world.

It stated that it would also impact structural changes, growth of output potential, and price stability.

The bank said that the increased frequency and severity extreme weather events and Canada’s low-carbon transition pose serious risks for Canada’s financial system. It also stated that the central bank would aim to price these risks in markets.

It pledged to taking four steps: developing new models and data source, assessing the Canadian financial sector’s climate exposures, as well as measuring, mitigation, and reporting on its operational climate risks.

Canada’s Bank of Canada has also committed to working with foreign and domestic partners in issues such climate disclosures as well as the transition of climate for large resource-rich countries like Canada.

Canada is fifth largest oil producer worldwide, with most of its oil coming from the oil sands.