In its November 2020 Financial Stability Report, the Federal Reserve stated, for the first time, that climate change adds uncertainty and risk to the US economy and its financial institutions (https://www.federalreserve.gov/publications/files/financial-stability-report-20201109.pdf).
The report updates the Federal Reserve’s assessments of vulnerabilities in the financial system, and factors or shocks that may affect them. Vulnerabilities include asset prices such as real estate values, and the ability of businesses and households to pay off debt.
One such shock is climate change. The Federal Reserve report warns that acute climate events, such as storms, floods, droughts, and wildfires can quickly alter the value of real and financial assets. Drops in real estate prices after floods or wildfires can have domino-like effects on banks, insurance companies and other parts of the financial system. The Federal Reserve expects banks to measure, monitor and control all relevant financial risks, and this now includes climate change.
The Federal Reserve report underscores the need for effective climate action.
One legislative solution is already available. The Energy Innovation and Carbon Dividend Act (H.R. 763) is currently before the US House of Representatives. It collects a modest fee on fossil fuels, and returns the revenue to US taxpayers. Economists predict that this market-based approach will curb climate change (https://www.energypolicy.columbia.edu/research/report/assessment-energy-innovation-and-carbon-dividend-act). You can ask your members of Congress to pass H.R. 763!
You can also write to the Pennsylvania Environmental Quality Board to support the Regional Greenhouse Gas Initiative, which will decrease emissions, lower healthcare costs, and promote economic growth (https://www.ahs.dep.pa.gov/eComment/).
Edward Cullen, State College
This article originally appeared in the Centre Daily Times.