WASHINGTON (AP) — The Treasury Department on Thursday took the first step for financial markets to start pricing in the potential risks and costs from climate change, key to transforming the economics of reducing carbon emissions.
The Financial Stability Oversight Council — led by Treasury Secretary Janet Yellen — has issued a 133-page report that outlines plans to measure the damage climate change could pose to the world economy. Also among the 10 voting members on the council are the heads of the Federal Reserve and the Securities and Exchange Commission.
By releasing the document 10 days before a United Nations conference on climate change in Glasgow, Scotland, the Biden administration is telling the broader international community that it is putting together the policy architecture to address climate change and improve the resilience of the markets.
With the United States lagging behind the European Union and the United Kingdom in responding to climate change’s economic threats, the administration hoped to use the report to assert more leadership on the issue.
As recommended by the report, a special advisory committee would be established of scientists, Wall Street executives, business and labor leaders, environmentalists and others to help develop standards for monitoring the economic impacts of climate change .
The report also advises identifying and filling gaps in data for assessing how climate change could threaten the economy, including the sharing of the data across the federal government and with international counterparts.
Companies and government agencies would also have new standards for public disclosures about the climate, a move designed to make it easier for the markets to appropriately weigh the impacts of climate change and the potential savings from reducing those impacts through renewable energy.
The Financial Stability Oversight Council was established in response to the 2007-2009 Great Recession, which was triggered by defaults on sub-prime mortgages. One key solution coming out of that downturn was to stress test banks to ensure they had the resources to survive a severe economic downturn. The council advises employing similar kinds of stress tests, called “scenario analysis” in the report, regarding climate change.
Josh Boak, The Associated Press
