Philip Lane said that transitioning to a low-carbon economy would pose a range of risks to households and businesses

An “excessive delay” to raising carbon taxes could shake the financial stability of the economy and trigger a recession, the governor of the Central Bank has said.

Philip Lane said that the transition to a low-carbon economy posed risks to financial stability. It would require considerable investment by households, firms and the government which, if delayed for too long, would eventually create the need for a “sharper” subsequent adjustment.

Such a scenario would pose a risk to economic security, Mr Lane said.

“If the carbon transition is excessively delayed by insufficient policy action, including inadequate increases in carbon taxes, a sharp policy shift will be ultimately required,” he said.

Speaking at NUI Galway, Mr Lane said that such a “sudden transition” could be “sufficiently disruptive