Dhaka, Bangladesh
Fed digs into climate change economics

Fed digs into climate change economics

SAN FRANCISCO, Nov 8: In their deliberations on monetary policy, Federal Reserve policymakers need to consider many factors, but up to now, climate change has not been one of them, reports Reuters. But as worries about the warming planet increase, the U.S. central bank is taking a closer look at the economic impacts of higher temperatures, more frequent severe weather, and rising sea levels. A “green interest rate” is one of the ideas on view Friday as the San Francisco Fed convenes the U.S. central bank’s first-ever conference on climate change and economics. The event is so oversubscribed a webcast has been created to meet demand. While the Fed lags central banking peers such as the Bank of England in making climate change an explicit part of its financial stability remit, the conference is the latest sign the Fed has started to take the risks and costs of global warming seriously. “It’s important for us from a monetary policy perspective to know what the potential growth rate of the economy is and if climate events or climate risk is going to shave that off, even if it’s over the long term,” San Francisco Fed chief Mary Daly said in New York earlier this week. Papers to be presented at this week’s conference provide that perspective in a range of ways. One estimates climate change could subtract 7 per cent from real world per capita GDP by 2100; another finds that subsidies for green energy like wind and solar are not an effective tool against global warming, but carbon taxes, if implemented in many parts of the world, would be. Others papers map out how climate change affects asset prices and show trade policy subsidizes greenhouse gas emissions. The U.S. central bank is focusing more intently on global warming, even as President Donald Trump’s administration denies it exists. Trump, who has called climate change a “hoax,” on Monday officially 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. Already the target of Trump’s ire for not lowering interest rates even more than he already has, Fed Chair Jerome Powell said recently that central banks are working out how directly they should confront climate change. “We are not in a place where I think we would conduct monetary policy in order to deal with climate change type issues,” Powell said last month in Denver, “but there’s a lot of forward-thinking analysis going on.”

Share |