The Federal Reserve Finally Talks About the Climate Crisis
It seems the reality of the climate crisis is too much for the Federal Reserve to ignore anymore.
For the first time, the Federal Reserve Bank of San Francisco, one of its 12 branches, held the system's first climate-related economic conference last week. By hosting "The Economics of Climate Change" conference the Federal Reserve signaled its willingness to engage with 40 global central banks on addressing the climate crisis. The Network for Greening the Financial System is a cooperative network between banks and some of the world's largest economies. The U.S. Federal Reserve Bank has been a notable non-participant, according to Mother Jones.
The conference also signals the Fed's awareness that the economic turmoil that the climate crisis is capable of will be too much to ignore, as The New York Times reported.
"Similar to many areas around the country, we need not look far from here to see the potentially devastating effects of our changing climate," said Lael Brainard, the Fed's governor in her speech at the conference. "Less than a hundred miles from here, families have lost their homes and businesses, and entire communities have been devastated by the Kincade fire. Some have described PG&E's bankruptcy as the first climate change bankruptcy. Some insurers have discontinued policies in fire-prone areas, which, in turn, is changing the costs of homeownership and the risk profiles of previously underwritten mortgages."
The Federal Reserve Bank is tasked with enforcing financial regulation and for steering the country to full employment and stable prices. Yet, the climate crisis threatens the Fed's ability to make payments, to maintain financial stability, and to guide monetary policy, as Yahoo! Finance reported.
"When you put all these pieces together, it becomes pretty clear: climate change is an economic issue we can't afford to ignore," said San Francisco Fed President Mary Daly, as Yahoo! Finance reported.
"This is not a hypothetical risk of the future...the risks are here, we have to deal with them," she said, as Reuters reported.
There are many questions that the climate crisis raises, such as how labor will be affected by a warming planet? What will be the impact of pollution on setting interest rates? And, will the climate crisis create a run on oil?
"Just on its own, the large amount of uncertainty regarding climate-related events and policies could hold back investment and economic activity," said Brainard in her speech.
"It is vital for monetary policymakers to understand the nature of climate disturbances to the economy, as well as their likely persistence and breadth, in order to respond effectively," said Brainard, as The New York Times reported. "Work to understand the implications of climate-related risks for our economy and financial system is at an early stage."
One of the notable issues that must be understood is the viability of 30-year home mortgage, which is traditionally the driving force in the housing market. As the climate crisis worsens and extreme weather, wildfires and flooding increase in duration and severity, it is possible that entire regions of the country will see the 30-year home mortgage disappear, as CBS News reported.
"It is a function of where there will be a market at all," wrote Jesse Keenan, a scholar who studies climate adaptation, in the Fed's introduction, as CBS News reported.
The trickle down effect of banks assessing the value of their mortgages could mean that the potential risks of flooding or other disasters could take entire areas off the market, which would lead to an exodus from neighborhoods and a dearth of tax revenue to repair crumbling infrastructure just as extreme weather worsens, according to CBS News.
The effect is already seen in California where 50,000 homeowners have been priced out of property or casualty insurance because of the increased threat of wildfires.
On the other hand, as CBS News pointed out, if banks ignore the risks and continue to hand out 30-year mortgages increased flooding could lead people to walk away from their homes and default, which could trigger a series of events similar to the 2008 recession.
"Nobody denies that [climate change] is happening, that it's real, that it is going to have a material effect. But by and large, there is such an inertia in our financial system that this isn't even on the radar of people," said Rachel Cleetus, policy director for the climate and energy program at the Union of Concerned Scientists, as CBS News reported. "The market is short-sighted. You have a three- to five-year horizon."
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A grim new assessment of the world's flora and fungi has found that two-fifths of its species are at risk of extinction as humans encroach on the natural world, as The Guardian reported. That puts the number of species at risk near 140,000.
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By Bob Jacobs
Hanako, a female Asian elephant, lived in a tiny concrete enclosure at Japan's Inokashira Park Zoo for more than 60 years, often in chains, with no stimulation. In the wild, elephants live in herds, with close family ties. Hanako was solitary for the last decade of her life.
Hanako, an Asian elephant kept at Japan's Inokashira Park Zoo; and Kiska, an orca that lives at Marineland Canada. One image depicts Kiska's damaged teeth. Elephants in Japan (left image), Ontario Captive Animal Watch (right image), CC BY-ND
Affecting Health and Altering Behavior<p>It is easy to observe the overall health and psychological consequences of life in captivity for these animals. Many captive elephants suffer from arthritis, obesity or skin problems. Both <a href="https://doi.org/10.11609/JoTT.o2620.1826-36" target="_blank">elephants</a> and orcas often have severe dental problems. Captive orcas are plagued by <a href="https://doi.org/10.1016/j.jveb.2019.05.005" target="_blank">pneumonia, kidney disease, gastrointestinal illnesses and infections</a>.</p><p>Many animals <a href="https://doi.org/10.1016/j.neubiorev.2017.09.010" target="_blank">try to cope</a> with captivity by adopting abnormal behaviors. Some develop "<a href="https://doi.org/10.1016/j.applanim.2017.05.003" target="_blank" rel="noopener noreferrer">stereotypies</a>," which are repetitive, purposeless habits such as constantly bobbing their heads, swaying incessantly or chewing on the bars of their cages. Others, especially big cats, pace their enclosures. Elephants rub or break their tusks.</p>
Changing Brain Structure<p>Neuroscientific research indicates that living in an impoverished, stressful captive environment <a href="https://doi.org/10.1016/j.jveb.2019.05.005" target="_blank" rel="noopener noreferrer">physically damages the brain</a>. These changes have been documented in many <a href="https://doi.org/10.1002/cne.903270108" target="_blank" rel="noopener noreferrer">species</a>, including rodents, rabbits, cats and <a href="https://doi.org/10.1006/nimg.2001.0917" target="_blank" rel="noopener noreferrer">humans</a>.</p><p>Although researchers have directly studied some animal brains, most of what we know comes from observing animal behavior, analyzing stress hormone levels in the blood and applying knowledge gained from a half-century of neuroscience research. Laboratory research also suggests that mammals in a zoo or aquarium have compromised brain function.</p>
This illustration shows differences in the brain's cerebral cortex in animals held in impoverished (captive) and enriched (natural) environments. Impoverishment results in thinning of the cortex, a decreased blood supply, less support for neurons and decreased connectivity among neurons. Arnold B. Scheibel, CC BY-ND<p>Subsisting in confined, barren quarters that lack intellectual stimulation or appropriate social contact seems to <a href="https://doi.org/10.1590/S0001-37652001000200006" target="_blank" rel="noopener noreferrer">thin the cerebral cortex</a> – the part of the brain involved in voluntary movement and higher cognitive function, including memory, planning and decision-making.</p><p>There are other consequences. Capillaries shrink, depriving the brain of the oxygen-rich blood it needs to survive. Neurons become smaller, and their dendrites – the branches that form connections with other neurons – become less complex, impairing communication within the brain. As a result, the cortical neurons in captive animals <a href="https://doi.org/10.1002/cne.901230110" target="_blank">process information less efficiently</a> than those living in <a href="https://doi.org/10.1002/dev.420020208" target="_blank">enriched, more natural environments</a>.</p>
An actual cortical neuron in a wild African elephant living in its natural habitat compared with a hypothesized cortical neuron from a captive elephant. Bob Jacobs, CC BY-ND<p>Brain health is also affected by living in small quarters that <a href="https://doi.org/10.3233/BPL-160040" target="_blank">don't allow for needed exercise</a>. Physical activity increases the flow of blood to the brain, which requires large amounts of oxygen. Exercise increases the production of new connections and <a href="http://dx.doi.org/10.1126/science.aaw2622" target="_blank">enhances cognitive abilities</a>.</p><p>In their native habits these animals must move to survive, covering great distances to forage or find a mate. Elephants typically travel anywhere from <a href="https://www.elephantsforafrica.org/elephant-facts/#:%7E:text=How%20far%20do%20elephants%20walk,km%20on%20a%20daily%20basis." target="_blank">15 to 120 miles per day</a>. In a zoo, they average <a href="https://doi.org/10.1371/journal.pone.0150331" target="_blank" rel="noopener noreferrer">three miles daily</a>, often walking back and forth in small enclosures. One free orca studied in Canada swam <a href="https://doi.org/10.1007/s00300-010-0958-x" target="_blank" rel="noopener noreferrer">up to 156 miles a day</a>; meanwhile, an average orca tank is about 10,000 times smaller than its <a href="https://www.cascadiaresearch.org/projects/killer-whales/using-dtags-study-acoustics-and-behavior-southern" target="_blank" rel="noopener noreferrer">natural home range</a>.</p>
Disrupting Brain Chemistry and Killing Cells<p>Living in enclosures that restrict or prevent normal behavior creates chronic frustration and boredom. In the wild, an animal's stress-response system helps it escape from danger. But captivity traps animals with <a href="https://doi.org/10.1073/pnas.1215502109" target="_blank">almost no control</a> over their environment.</p><p>These situations foster <a href="https://doi.org/10.1037/rev0000033" target="_blank">learned helplessness</a>, negatively impacting the <a href="https://doi.org/10.1155/2016/6391686" target="_blank" rel="noopener noreferrer">hippocampus</a>, which handles memory functions, and the <a href="https://doi.org/10.1016/j.neuropharm.2011.02.024" target="_blank" rel="noopener noreferrer">amygdala</a>, which processes emotions. Prolonged stress <a href="https://doi.org/10.3109/10253899609001092" target="_blank" rel="noopener noreferrer">elevates stress hormones</a> and <a href="https://doi.org/10.1523/JNEUROSCI.10-09-02897.1990" target="_blank" rel="noopener noreferrer">damages or even kills neurons</a> in both brain regions. It also disrupts the <a href="https://doi.org/10.1016/j.neubiorev.2005.03.021" target="_blank" rel="noopener noreferrer">delicate balance of serotonin</a>, a neurotransmitter that stabilizes mood, among other functions.</p><p>In humans, <a href="https://doi.org/10.1006/nimg.2001.0917" target="_blank" rel="noopener noreferrer">deprivation</a> can trigger <a href="https://doi.org/10.3389/fnins.2018.00367" target="_blank" rel="noopener noreferrer">psychiatric issues</a>, including depression, anxiety, <a href="https://doi.org/10.3389/fnins.2018.00367" target="_blank" rel="noopener noreferrer">mood disorders</a> or <a href="https://doi.org/10.1177/1073858409333072" target="_blank" rel="noopener noreferrer">post-traumatic stress disorder</a>. <a href="https://doi.org/10.1007/s00429-010-0288-3" target="_blank" rel="noopener noreferrer">Elephants</a>, <a href="https://doi.org/10.1371/journal.pbio.0050139" target="_blank" rel="noopener noreferrer">orcas</a> and other animals with large brains are likely to react in similar ways to life in a severely stressful environment.</p>
Damaged Wiring<p>Captivity can damage the brain's complex circuitry, including the basal ganglia. This group of neurons communicates with the cerebral cortex along two networks: a direct pathway that enhances movement and behavior, and an indirect pathway that inhibits them.</p><p>The repetitive, <a href="http://dx.doi.org/10.1016/j.bbr.2014.05.057" target="_blank">stereotypic behaviors</a> that many animals adopt in captivity are caused by an imbalance of two neurotransmitters, dopamine and <a href="https://doi.org/10.1016/j.neubiorev.2010.02.004" target="_blank" rel="noopener noreferrer">serotonin</a>. This impairs the indirect pathway's ability to modulate movement, a condition documented in species from chickens, cows, sheep and horses to primates and big cats.</p>
The cerebral cortex, hippocampus and amygdala are physically altered by captivity, along with brain circuitry that involves the basal ganglia. Bob Jacobs, CC BY-ND<p>Evolution has constructed animal brains to be exquisitely responsive to their environment. Those reactions can affect neural function by <a href="https://www.penguinrandomhouse.com/books/311787/behave-by-robert-m-sapolsky/" target="_blank">turning different genes on or off</a>. Living in inappropriate or abusive circumstance alters biochemical processes: It disrupts the synthesis of proteins that build connections between brain cells and the neurotransmitters that facilitate communication among them.</p><p>There is strong evidence that <a href="https://doi.org/10.1523/JNEUROSCI.0577-11.2011" target="_blank">enrichment</a>, social contact and appropriate space in more natural habitats are <a href="https://doi.org/10.1111/j.1748-1090.2003.tb02071.x" target="_blank" rel="noopener noreferrer">necessary</a> for long-lived animals with large brains such as <a href="https://doi.org/10.1371/journal.pone.0152490" target="_blank" rel="noopener noreferrer">elephants</a> and <a href="https://doi.org/10.1080/13880292.2017.1309858" target="_blank" rel="noopener noreferrer">cetaceans</a>. Better conditions <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5543669/" target="_blank" rel="noopener noreferrer">reduce disturbing sterotypical behaviors</a>, improve connections in the brain, and <a href="https://doi.org/10.1038/cdd.2009.193" target="_blank" rel="noopener noreferrer">trigger neurochemical changes</a> that enhance learning and memory.</p>