Janet Yellen has promised to make fighting climate change a priority as Treasury secretary, spurring hope among activists she will put the issue at the centre of US economic policy for the first time.
Yellen, President-elect Joe Biden’s nominee to lead the Treasury Department, has already endorsed a tax on carbon dioxide emissions and urged countries to set up independent councils that can pursue aggressive climate policies without political interference.
Advocates are appealing for her to go even further if confirmed, seizing her role as one of the most powerful people in finance to wield fiscal policy in the campaign against global warming. Some have outlined plans for how Yellen could trigger tighter regulation of oil and gas company finances under the Dodd-Frank Act – even going so far as to require them to sell off fossil fuel assets.
“Yellen will have the power to help move trillions of dollars out of fossil fuels and trillions more into renewables, ” said Jamie Henn, director of the non-profit advocacy group Fossil Free Media.
“She could do more for the Green New Deal than nearly any other cabinet position.”
Yellen declined to be interviewed for this article. Biden’s transition team said the incoming administration intends to turn the threat of climate change into a way to bolster the economy and create jobs.
Yellen’s Treasury Department is expected to play a central role in that effort by helping shape stimulus spending to pull the United States out of recession and fulfill Biden’s promise to invest as much as US$2 trillion on clean energy.
Both Biden and Yellen’s ambitions for big clean-energy spending could be constrained by Congress, where Republicans will hold at least 50 seats in the Senate. Conservatives have assailed congressional Democrats’ ambitions for a wave of spending to propel clean power and energy efficiency, including through expanded tax cuts and investments, as a socialist wish list.
Yellen’s interest in addressing climate change dates to her time in the Clinton administration, when she was the head of the Council of Economic Advisers. And she doesn’t mince words about the threat.
“It will have absolutely devastating consequences for humanity if we don’t address it, and time is running out to take the steps that are necessary, ” she said in an October interview with Bloomberg News.
Climate change is already affecting energy investments, raising the risk that oil, gas and coal reserves will lose value or be barred from development as governments clamp down on the greenhouse gas emissions generated by burning fossil fuels. Even non-energy investments in commercial buildings and real estate are at greater peril with the encroachment of rising seas and more intense storms fuelled by climate change.
Yellen “understands the critical links between the country’s economic health and climate change, ” said Andrew Steer, president of the World Resources Institute.
As Treasury chief, “Yellen would have strong authority to bring climate risks and opportunities more centrally into US economic and financial systems.”
Progressive Democrats argue that enlisting the Treasury Department in the battle against climate change is consistent with Biden’s plan to take a whole-of-government approach to the issue.“The private sector won’t take this seriously unless the government takes a stand, ” said Rhiana Gunn-Wright of the Roosevelt Institute.Congressional role
Critics of the approach say Congress – not the Treasury Department – should take the lead in addressing climate change and the financial risks it poses.
“Significant new policy, like that addressing climate, shouldn’t be set by financial policy or any other statute that was never intended to address such a major issue, ” said Kyle Isakower, a senior vice-president at the American Council for Capital Formation, a free-market think tank.
With legislation specifically designed to address the risks of climate change, “financial policy can play an appropriate role.”
Any aggressive moves would invite conflict with the US oil and gas industry, which is already bracing for the Biden administration to tighten environmental mandates on drilling and block development on federal lands.
Some options, such as greater capital holding requirements for banks that have fossil investments, are “a terrible idea, ” said Norbert Michel, director of Heritage Foundation’s Centre for Data Analysis.
“If we are going to talk about a climate disaster where the Earth burns up, a bank holding an extra 2% capital or not lending to certain companies isn’t going to change that.”
The Treasury Department can have global influence by charting new climate finance strategies through the Group of 20, the International Monetary Fund and the World Bank. Financing can be directed toward emissions-lowering projects overseas, with the Treasury encouraging the phaseout of fossil fuels subsidies as well as increased funding focused on closing coal plants.
Yellen in October joined former Bank of England governor Mark Carney in urging governments to establish climate change councils empowered to confront the problem. The G30 Working Group led by Yellen and Carney emphasized that the scale of the challenge “means that carbon prices alone are not enough, ” and must be buttressed by investments in low-carbon infrastructure and clean energy research.
Yellen can start by simply addressing the issue – making the case to American workers and businesses that climate policies “can spur economic growth, ensure strong employment and resilient financial markets, ” Duke University’s Tim Profeta and former White House officials Joseph Aldy and Himamauli Das wrote in a 24-page memo for the Biden-Harris transition. — Bloomberg
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