US Secretary of the Treasury Janet Yellen on Wednesday pledged to aggressively tackle climate change using all the tools at her disposal, warning that a failure to do so effectively and promptly could undermine economic growth.
To bring the US economy in line with international goals of eliminating carbon emissions would “require bold and urgent action — nothing less than transforming important sectors of the global economy, especially when it comes to how we generate power and move people and goods,” Yellen said in a wide-ranging speech to the Institute of International Finance.
“We are committed to directing public investment to areas that can facilitate our transition to net-zero and strengthen the functioning of our financial system so that workers, investors and businesses can seize the opportunity that tackling climate change presents,” Yellen said.
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US President Joe Biden was yesterday to convene a summit of 40 world leaders on climate change, where he was expected to unveil a target to cut emissions by about 50 percent by 2030 compared with 2005 levels.
Yellen’s remarks reflect a sharp reversal of the policies of former US president Donald Trump’s administration, which had pulled the US out of the 2015 Paris Agreement and blocked greater action by G7 nations.
Yellen said that international cooperation was urgently needed, and the Biden administration’s comprehensive approach to climate change would give financial institutions and international partners greater certainty about US plans.
“This is an immense, immense task. We need to work together closely ... in order to deal with what has become an essential risk to our planet,” Yellen said during a question-and-answer session after her speech, adding that the financial sector had a big role to play in funding the transition to a net-zero economy.
The costs would be “enormous,” Yellen said, adding that Biden’s US$2.3 trillion infrastructure plan would make some needed investments in greening the economy while removing tax subsidies for fossil fuels, which cost taxpayers about US$4 billion per year.
Private capital would be needed to fill a gap that one estimate put at more than US$2.5 trillion for the US alone over the next decade, she said.
To make that happen, investors needed reliable, consistent and comparable data on climate-related risks amid the growing incidence of severe weather events, she added.
The Financial Stability Oversight Council would be the principal agency managing and assessing the financial risks associated with climate change, and if necessary, taking appropriate action to mitigate them, Yellen said.
The council could also facilitate the sharing of data on risks among regulators, but that required greater disclosures by nonfinancial and financial companies of risks, she added.
The global Financial Stability Board’s Task Force on Climate-related Disclosure had devised a framework that was proving useful, she said, adding that she hoped the US Securities and Exchange Commission would base its own efforts on that work.
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