Quantcast

The Federal Reserve Finally Talks About the Climate Crisis

Popular
Mary Daly, president of the San Francisco Federal Reserve Bank, poses for a photograph. Nick Otto / Washington Post / Getty Images

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."

EcoWatch Daily Newsletter

Ocean pollution concept with plastic and garbage. Anton Petrus / Moment / Getty Images

Nestlé cannot claim that its Ice Mountain bottled water brand is an essential public service, according to Michigan's second highest court, which delivered a legal blow to the food and beverage giant in a unanimous decision.

Read More Show Less

A number of supermarkets across the country have voluntarily issued a recall on sushi, salads and spring rolls distributed by Fuji Food Products due to a possible listeria contamination, as CBS News reported.

Read More Show Less
Sponsored
Birds eye view of beach in Green Bowl Beach, Indonesia pictured above, a country who's capital city is faced with the daunting task of moving its capital city of Jakarta because of sea level rise. Tadyanehondo / Unsplash

If you read a lot of news about the climate crisis, you probably have encountered lots of numbers: We can save hundreds of millions of people from poverty by 2050 by limiting global warming to 1.5 degrees Celsius above pre-industrial levels, but policies currently in place put us on track for a more than three degree increase; sea levels could rise three feet by 2100 if emissions aren't reduced.

Read More Show Less
A U.S. Border Patrol agent gathers personal effects from immigrants before they are transferred to a McAllen processing center on July 02, 2019 in Los Ebanos, Texas. John Moore / Getty Images

Poverty and violence in Central America are major factors driving migration to the United States. But there's another force that's often overlooked: climate change.

Retired Lt. Cmdr. Oliver Leighton Barrett is with the Center for Climate and Security. He says that in Guatemala, Honduras and El Salvador, crime and poor economic conditions have long led to instability.

"And when you combine that with protracted drought," he says, "it's just a stressor that makes everything worse."

Barrett says that with crops failing, many people have fled their homes.

"These folks are leaving not because they're opportunists," he says, "but because they are in survival mode. You have people that are legitimate refugees."

So Barrett supports allocating foreign aid to programs that help people in drought-ridden areas adapt to climate change.

"There are nonprofits that are operating in those countries that have great ideas in terms of teaching farmers to use the land better, to harvest water better, to use different variety of crops that are more resilient to drought conditions," he says. "Those are the kinds of programs I think are needed."

So he says the best way to reduce the number of climate change migrants is to help people thrive in their home countries.

Reporting credit: Deborah Jian Lee / ChavoBart Digital Media.

Reposted with permission from Yale Climate Connections.

Chris Pratt arrives to the Los Angeles premiere of "Jurassic World: Fallen Kingdom" on June 12, 2018 in Los Angeles, California. Michael Tran / FilmMagic / Getty Images

Chris Pratt was called out on social media by Game of Thrones star Jason Momoa after Pratt posted an image "low key flexing" with a single-use plastic water bottle.

Read More Show Less