SAN FRANCISCO (Reuters) – A top Federal Reserve policymaker on Friday signaled the U.S. central bank may join its international peers in incorporating climate change risk into its assessments of financial stability, and may even take it into account when setting monetary policy.
FILE PHOTO: Federal Reserve Board Governor Lael Brainard speaks at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., March 1, 2017. REUTERS/Brian Snyder
The remarks, from Fed Governor Lael Brainard at the opening of the Fed’s first-ever conference on climate change and economics, mark a shift for the Fed, which lags other major central banks in making climate change an explicit part of its financial stability remit.
But her talk, the first she’s given in her five-year tenure at the Fed that even mentions the subject, suggests she and her colleagues are taking the risks and costs of global warming increasingly seriously.
“Congress has assigned the Federal Reserve specific responsibilities in monetary policy, financial stability, financial regulation and supervision, community and consumer affairs, and payments,” Brainard said in prepared remarks to be delivered this evening, but that were released this morning. “Climate risks may touch each of these.”
The U.S. central bank’s new focus on global warming comes even as President Donald Trump’s administration denies it exists. Trump on Monday notified the United Nations that the United States will in 12 months leave the Paris Climate Accord, under which 195 nations agreed to reduce greenhouse gas emissions in a bid to prevent catastrophic planetary warming.
Scientists are in broad agreement that carbon dioxide from cars, power plants and other human sources are behind the climate change that’s already making powerful hurricanes, severe drought, and other weather extremes more frequent.
The San Francisco Fed’s conference, so oversubscribed that a webcast has been created to meet demand, will allow policymakers to consider a broad range of research that could help inform a shift at the Fed.
“Climate change is an issue we can’t afford to ignore,” San Francisco Fed President Mary Daly said at the start of the conference, a day that also marked the one-year anniversary of a fire 150 miles north of San Francisco that killed 85 people and destroyed 14,000 homes, a conflagration blamed in part on climate change. “This is not a hypothetical risk of the future…the risks are here, we have to deal with them.”
The Fed, Brainard said, will need to look at how to keep banks and the financial system resilient amid risks from extreme weather, higher temperatures, rising sea levels and other effects of the accumulation of greenhouse gases in the atmosphere.
And increasingly, she said, “it will be important for the Federal Reserve to take into account the effects of climate change and associated policies in setting monetary policy to achieve our objectives of maximum employment and price stability.”
Reporting by Ann Saphir and Lindsay Dunsmuir; Additional reporting by Jonnelle Marte in New York; Editing by Andrea Ricci