This paper develops and estimates a non-linear New Keynesian Climate (NKC) model for the world economy featuring climate change damage and mitigation policy. The model boils down to four equations: Phillips and IS curves, as well as a monetary policy rule and a law of motion for CO2 emissions. This framework allows us to identify two phe­nomenons faced by the central bank. The first one is a persistent negative supply shock called clirnateflation that arises from the deleterious effects of climate change itself. The second one is a transitory positive demand shock called greenflation that appears following the implementation of a climate mitigation policy.

JEL: E32, E52, Q50, Q54.